Why Today's GDP Number Was Even Worse Than It Looked


Headline GDP of 2.8% for Q4 was just a bit below expectations of 3%.

But Goldman observes…

The GDP price index increased by just 0.4% (annualized) in Q4, far below consensus expectations for a 1.9% increase. Nominal GDP growth was therefore quite soft at just +3.2%. The core PCE price index rose by 1.1%, slightly above consensus forecasts.

Fans of nominal GDP targeting must be freaking out.

Also in the note…

The weakness reflected: (1) slightly weaker than expected consumer spending of +2.0%; (2) weaker than expected business fixed investment, reflecting a 7.2% decline in structures investment; and (3) a 12.5% contraction in federal government spending on national defence. National defence spending tends to be volatile, and we would therefore discount this component as a signal about the near-term growth outlook. The misses on consumer spending and business investment are arguably more meaningful.

So now the question is: Does this mean QE3?

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