Economic Brief 01/30/15

Economic Brief
Fourth Quarter GDP Report
The pace of US GDP growth slowed to 2.6% in the fourth quarter according to the
initial estimate from the Commerce Department. This follows a 5% rate in the third
quarter, and puts the final 2014 growth rate at 2.5%. Consensus estimates before
the release had the Q4 number at 3%. Notably (and somewhat disturbingly), the
GDP price index plunged to a 0.0% change for the quarter, and 1.2% YOY. Much of
this is energy related, but it no doubt adds to fears of general deflation infecting
the US economy in spite of relatively strong trend growth.
Parsing the top-line GDP number, personal consumption expenditures ramped
up by 4.3%, an increase from the prior rate of 3.2%. Net exports rose 2.8%, a
deceleration from Q3’s 4.5% pace. Real final sales of domestic product (which
strips out inventory adjustment and net exports) dropped to a 1.8% pace from
an increase of 5% in the third quarter. This suggests that there was a slowdown
in overall domestic demand. Overall, the growth trend remains healthy, but the
inflation data is uncomfortable. Bond prices are up sharply after the release… 10yr
up 3/4pts at a 1.66% yield.
US GDP Price Index - Quarterly Change: 1994 - Today
Financial Strategies Group
Jeffrey F Caughron
Chief Operating Officer / Managing Director
jcaughron@gobaker.com
(800) 937-2257
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January 2015
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