The US economy expanded at a 4% annual rate in the fourth quarter, the government said Thursday. That was slightly below estimates.
The market was looking for 4.2%. The range was 1.5% to 6.8% from 70 economists
The data confirmed what everyone already knew — momentum is waning and Joe Biden’s administration faces an uphill battle to ensure vaccine rollout proceeds quickly and efficiently enough to inoculate the economy form a double-dip downturn.
Around 10 million Americans who had a job this time last year don’t have one now, and December’s jobs report clearly suggested the beleaguered leisure and hospitality sector remains vulnerable.
Recent data on retail sales and personal spending have underscored the contention that as the effect of stimulus waned, so did Americans’ capacity to consume.
Personal consumption during the fourth quarter rose just 2.5%. That was underwhelming. Consensus was looking for 3.1%.
The disappointing read on spending comes on the heels of a record surge in the third quarter, when the economy rebounded from the initial pandemic lockdowns.
One of the key questions moving forward is whether the American consumer can hold up in the face of myriad headwinds and in the absence of additional stimulus from Congress. Parts of Biden’s relief plan face stiff opposition from Republicans. It goes without saying (or it should) that all derisive, misplaced references to the “squandering” of stimulus payments (e.g., on stock speculation) aside, $1,400 and a minimum wage hike would do wonders on the demand side.
Nonresidential fixed investment rose 13.8% after a 22.9% third quarter surge.
That’s perhaps not surprising. It’s spending in the services sector that folks are concerned about right now, not so much business spending.
Sales to domestic purchasers (ex.-government) rose 5.6%, down from 39% in Q3.
As you might expect considering the red-hot state of the housing market, residential investment was strong, printing 33.5% for the fourth quarter.
That comes after a truly laughable 63% leap in the previous period.
Taken as a whole (and without digging too deeply into the release on a first read), the data simply confirms the existing narrative on multiple fronts. The economy is decelerating, and if vaccine rollout hits any stumbling blocks, the situation could become more acute, especially if the services sector is constrained from operating at full capacity for another six months.
Consumers are getting tired, it would seem, and probably need another boost. It’s entirely reasonable to suggest that savings cushions accumulated by lower- and middle-income Americans are depleted or, at the least, less likely to serve as “dry powder” for consumption going forward. The housing market is fine (if you think prospective bubbles are “fine”), and business investment seems to be some semblance of resilient.
Happily for politicians, it’s probably possible to spin this any which way you like.
