4th Quarter revised up…again

by Thomas Cooley, Ben Griffy and Peter Rupert

The final estimate of 4th quarter GDP for 2015, 1.4% doubled the first estimate from January, 0.7%.  Yet, looking at the year -over-year change (the blue line in the graph below) growth has slowed over the past several quarters and one can pick out some “mini-cycles” since the Great Recession. The final estimate for annual growth for 2015 came out at 2.4%, exactly the same as 2014.

Real personal consumption expenditures (PCE) grew at 2.4%, a slight revision up as well, but again shows a downward trend over the past year or so. Residential fixed investment (structures) grew at a solid 10.1% and has remained at fairly steady pace since the 4th quarter of 2014. However, nonresidential structures declined at a 5.1% pace after declining 7.2% in the 3rd quarter of 2015.

gdprealchgm-2016-03-25pcerealchgm-2016-03-25Since the trough of the last recession, dated Q2 of 2009 from the NBER, the recovery has been the weakest in recent history, as can be seen in the graph below. For example, take the 1969 cycle, about in the middle of the lines below. Roughly 7 years after bottoming out, the economy grew by about 25%. The current recovery is  but 15% higher 7 years after the trough. The same slow growth is true about consumption.

The table below shows the averages for contractions and expansions since 1854. Over time the contractions have gotten shorter and the expansions longer. Just as a point of reference, the current expansion is about 28 quarters long.

Cycles Contraction (quarters) Expansion (quarters)
1854-1919 (16 cycles) 21.6 26.6
1919-1945 (6 cycles) 18.2 35.0
1945-2009 (11 cycles) 11.1 58.4
1960-2009 (8 cycles) 11.6 65.1

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