By Thomas Cooley and Peter Rupert
GDP
The BEA announced that the advance estimate for Q4 real GDP increased 4.01% on an annual basis. Final Q3 growth was 33.44%. Over the year real GDP fell 3.5%, a historic collapse. But GDP in the second half of the year has continued to bounce back after the first half disaster. Given that continued increase there is some evidence that the recovery will look “V” shaped in the end.
Real personal consumption expenditures increased 2.5% in Q4 and was down 3.9% over the year. Real gross private investment grew at 25.3%, with equipment investment increasing 24.9% and residential structures up 33.5% for the quarter.
The personal savings rate fell slightly but remains elevated at 13.4%.
The BEA released personal income today and showed that real disposable personal income increased 0.22% over the month while real personal consumption expenditures declined 0.61%. It appears that after the wild gyrations things may have settled down somewhat.
Unemployment Claims
Initial claims and continued claims were also released this morning. Both showed improvement with initial claims falling 69,000 and continued claims down 203,000. The composition of the unemployed has also been changing with a decrease in the share of job losers and an increase in re-entrants.
The economy continues to show signs of underlying strength but obstacles will remain until the pandemic is under control enough for services and the retail sector to recover.
Count us among those who believe the Fed has done all it can or should to support the recovery. With Powell at the Fed and Janet Yellen at the Treasury we can be assured of thoughtful cooperative monetary and fiscal policy as the year progresses.
