The BEA reports GDP rose 2.3 percent vs a consensus 2.6 percent. But details are mixed.
Today the Advance Estimate of GDP from the BEA for the fourth quarter of 2024 is 2.3 percent at an annualized quarterly rate.
The increase in real GDP in the fourth quarter primarily reflected increases in consumer spending and government spending that were partly offset by a decrease in investment. Imports, which are a subtraction in the calculation of GDP, decreased.
A Word About Imports
Despite the BEA’s statement, imports have no impact on GDP.
The BEA subtracts imports because it erroneously add imports to GDP when it shouldn’t.
For example, you buy something from Amazon produced in China, that erroneously adds to GDP. To correct the error, the BEA subtract imports.
Real GDP, Real Final Sales, Real GDI Billions 2024-Q4
GDP vs GDI
GDP and GDI are two measures of the same thing. The measure of product sold should match the measure of income and wages produced.
The Philadelphia Fed and others have concluded that GDI is a more accurate measure and I agree.
But GDI lags GDP by one month in Q1, Q2,and Q3. GDI lags by two months in Q4. We will not see GDI until the third estimate for Q4.
Gap Between Real GDP and Real GDI
The gap between GDP and GDI has been positive for 7 consecutive quarters. This makes sense because job revisions have been negative for years.
If job growth is overstated, it’s easy to believe income is overstated as well. But we will not have GDI for the fourth quarter for another two months.
Instant Gratification
Because the market always wants instant gratification, we look at GDP instead of GDI.
The same applies to BLS monthly jobs reports are grossly distorted estimates vs QCEW data that encompasses a 95% of the data.
The monthly jobs reports are so bad, the BLS would do everyone a service if it stopped producing them. The same applies with GDP and GDI.
GDP Stronger Than It Looks
For those who believe GDP is the better measure, Real Final Sales is the number to watch.
The difference between GDP and Real Final Sales is inventory adjustment that nets to zero over time.
Annualized GDP was 2.3 percent but annualized Real Final Sales was a much stronger 3.2 percent.
Also, the consensus estimate for Personal Consumption Expenditures was 3.1 percent in a range of 2.9 percent to 3.7 percent.
But the BEA reports a very strong 4.2 percent blowing away even the top estimate.
Something is amiss somewhere with these spending-income discrepancies.
On the Negative Side
Closer scrutiny shows it was not all rosy.
Investment took a full percentage point off contributions to GDP.
Consumer spending is all that kept the economy humming. Is that going to last?
Those are the good, bad, and ugly details.
Jobs Overstatement
On November 20, I commented Quarterly QCEW Data Provides More Evidence of BLS Jobs Overstatement
My prior comparisons and advance calls suggest we see negative revisions in nonfarm payrolls from 2023 Q2 to 2024 Q2 of well over one million. My initial stab is about 1.2 million to the downside.
The BLS Birth-Death model is seriously messed up an/or the BLS is oversampling large corporations and under sampling small businesses.
The BLS monthly nonfarm payroll reports are consistent garbage.
On January 3, I noted ISM Manufacturing Contracts 9th Month and the 25th Time in Last 26 Months
ISM manufacturing is still in contraction. Employment weakened further.
On January 29 I noted Trump Announces New Tariffs on Computer Chips and Semiconductors
Trump goes after Taiwan in a spat over semiconductors.
January 23, 2025: A Great Tariff Experiment as Trump Repeats Threat of Universal Tariffs
All eyes are on February 1 as Trump renews his threat for universal tariffs.
If Trump places 25 percent tariffs on Canada and Mexico, he will be breaking his own USMCA deal with potentially very serious implications.
No country could ever expect Trump to honor deals he makes.