US Economic Comment:Q4GDP unrevised.Trade implies Q1GDP drag

Q4 real GDP—stronger consumption, softer investment than in prior estimateReal GDP growth was unrevised at a 1.9% annual rate in Q4 (cons and UBSe 2.1%).

    Consumer spending was revised up 0.5pct pt to a 3.0% pace. However, there weresmall offsetting revisions to business fixed investment (-1.1pt to 1.3%), residentialinvestment (-0.6pt to 9.6%), and government purchases (-0.8pt to 0.4%). The netresult was a different composition of domestic demand, with more consumption butless investment or government spending. Domestic final sales were unrevised at a 0.9%annual rate.

    Capex continues to show a very gradual stabilization, consumption continues to showdecent momentum, inventories were little revised. Those small changes imply little newinformation affecting assessments of Q1.

    Trade gap widens on import strengthThe trade deficit ballooned to $69.2B in Jan (cons and UBSe $66.0B), while Dec wasrevised marginally narrower to $64.4B from $65.0B. At the margin, this is less positivefor Q1 growth.

    However, exports maintained momentum, a 0.3% decline that reversed little of theprior month's 4.1% gain. Imports were broadly stronger, with continued gains inindustrial supplies, capital goods, autos, and nonauto consumer goods. While that's anegative for GDP growth, it also suggests building momentum in domestic demand.

    Implications for Q1 GDPWe had interpreted the January retail sales data as consistent with Q1 real consumptiongrowth at a bit above a 2% annual rate. Monthly real consumption data will bereleased tomorrow and will probably appear a bit softer than that in Jan alone becauseof utilities usage but we assume around there for the quarter as a whole as utilitiesreaccelerate.

    Until now, those retail sales figures were probably the cleanest estimate for Q1 GDPgrowth: we really had no other hard data on spending and output—and they signalledQ1 real GDP growth tracking a little above 2%. The trade data imply a bit softer, andthat's a contrast to recent "nowcast": the NY Fed at 3.1% and the Atlanta Fed at2.5%. Both of those appear to have been affected by positive manufacturing surveys(Phila Fed, ISM), and those factory surveys may well have been exaggerated by theincreases in business confidence since the election.