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<ul class="summary-list"><li>The <keyword id="124474" type="PERSON" weightage="60" keywordseo="UK-economy">UK economy</keyword> shrank 9.9% in 2020 but grew 1% in Q4, figures showed on Friday.</li><li><keyword id="11101" type="COUNTRY" weightage="60" keywordseo="Britain">Britain</keyword>'s economy was battered by the pandemic, while its death toll has been steep.</li><li>Yet the Bank of England expects a sharp recovery in the second half of 2021.</li></ul>The UK economy shrank by 9.9% in 2020 as the <keyword id="8829783" type="UNKNOWN" weightage="60" keywordseo="coronavirus-pandemic">coronavirus pandemic</keyword> battered the country, official <keyword id="913054" type="PERSON" weightage="60" keywordseo="Q4-GDP">Q4 GDP</keyword> figures showed on Friday.It was the worst contraction since records began and likely sharpest contraction overall in 300 years. It means the UK economy fared the worst out of the G7 group of rich democracies and among the worst overall.The economy grew 1% in the final three months of the year, the country's Office for National Statistics <a href="https://www.ons.gov.uk/economy/grossdomesticproductgdp/bulletins/gdpfirstquarterlyestimateuk/octobertodecember2020">said</a>, after dealing better than expected with a sharp tightening of restrictions in November. Britain's gross domestic product had grown 16.1% in the third quarter.But despite two consecutive quarters of growth, GDP remained 7.8% below its level in the fourth quarter of 2019.Along with one of the worst economic downturns, the UK has one of the world's highest coronavirus death rates, with more than 110,000 having so far died from COVID.Read More: <a href="https://www.businessinsider.com/stocks-to-buy-online-retail-pandemic-picks-structural-winners-bofa-2021-2" target="_blank" rel="noopener noreferrer">BANK OF AMERICA: Buy these 7 online-retail stocks that are 'structural winners' set to build on strong 2020 gains - including one with 41% upside</a>Yet the UK has been one of the fastest countries in the world at rolling out coronavirus vaccines, after rapidly approving jabs from AstraZeneca/Oxford, Pfizer/BioNTech and Moderna.The Bank of England <a href="https://markets.businessinsider.com/news/stocks/bank-of-england-cuts-2021-growth-forecast-for-uk-economy-2021-2-1030043126">cut its growth forecast</a> for the UK economy in 2021 to 5% on February 4, saying the lockdown put in place in January would delay the recovery. It also expects <a href="https://www.businessinsider.com/companies-say-post-brexit-rules-are-clogging-up-uk-eu-trade-2021-1">Brexit</a> to weigh on growth in the first quarter.However, the Bank said that the recovery will be "rapid" when it comes, thanks to vaccines allowing people to go out and spend again. The BoE said it expects the UK economy to regain its pre-COVID size at the start of 2022.The UK's 9.9% contraction in 2020 compares unfavorably with the rest of the G7. The <a href="https://www.businessinsider.com/us-q4-gdp-growth-economic-recovery-coronavirus-stimulus-pandemic-recession-2021-1">US economy</a> shrank 3.5%, while Canada's economy is expected to have shrunk around 5%.Germany shrank 5%, France contracted 8.3% and Italy's economy finished the year 8.8% smaller. Japan's GDP is expected to have contracted around 5.5%.Read More: <a href="https://www.businessinsider.com/stock-market-outlook-blackrock-investing-advice-covid-pandemic-shifts-sectors-2021-2" target="_blank" rel="noopener noreferrer">BlackRock says investors haven't fully priced in the structural changes brought about by the pandemic - and pinpoints 2 areas of the market that can still run for years</a>

The UK economy suffered the biggest slump in the G7 in 2020, shrinking a record 9.9% as COVID-19 hit hard

<table class="image-container float_right" width="200"><tr><td><div class="image"></div><a href="http://www.nasa.gov/multimedia/imagegallery/image_feature_2047.html">www.nasa.gov</a></td></tr></table>Remember that Q4 <keyword id="35050" type="CITY" weightage="60" keywordseo="gdp">GDP</keyword> report that came in at 0.1%?
It won't stay negative.
From Nomura:
Data releases today each had a significant impact on our Q4 GDP tracking model, but on net the change was a small positive. We began the day with Q4 GDP tracking a decline of -0.1%, matching the BEA's advanced estimate. Better-than-expected December trade data lifted Q4 tracking to 0.6%, but December wholesale inventory data pushed it back down to 0.2%.
The trade deficit narrowed sharply in December, much more so than the BEA's original assumption in its Q4 GDP estimate. The December trade gap was the narrowest since January 2010. Exports jumped by 2.1% in December while imports dropped by 2.7%. Imports tend to reflect movements in inventories and the large inventory drawdown reported in Q4 suggested that imports had declined.

NOMURA: That Negative Q4 GDP Report Will Be Revised Higher, Economy Actually Grew

<div class="image-container float_right" style="width:400px"><div class="image"></div><a href="http://www.usshanson832.org/gallery-204.htm">USS Hanson</a></div>The final release for fourth-quarter U.S. <keyword id="35050" type="CITY" weightage="60" keywordseo="gdp">GDP</keyword> is out.
GDP rose 0.4 percent in the fourth quarter, slightly below economists' estimates of a 0.5 percent advance. (The prior estimate released at the end of February predicted only 0.1 percent growth.)
Personal consumption growth came in at 1.8 percent, below economists' estimates of a 2.1 percent advance, which is also what the February reading predicted.
The 0.4 percent advance in the American economy in the fourth quarter is down from the 3.1 percent expansion in Q3.
Below is a summary of the data <a href="http://www.bea.gov/newsreleases/national/gdp/gdpnewsrelease.htm">from the release</a>:
Real gross domestic product -- the output of goods and services produced by labor and property located in the United States -- increased at an annual rate of 0.4 percent in the fourth quarter of 2012 (that is, from the third quarter to the fourth quarter), according to the "third" estimate released by the Bureau of Economic Analysis. In the third quarter, real GDP increased 3.1 percent.
The GDP estimate released today is based on more complete source data than were available for the "second" estimate issued last month. In the second estimate, real GDP increased 0.1 percent. While nonresidential fixed investment is higher than previously estimated, the revision to GDP has not changed the general picture of the economy (for more information, see "Revisions" on page 3).
The increase in real GDP in the fourth quarter primarily reflected positive contributions from personal consumption expenditures (PCE), nonresidential fixed investment, and residential fixed investment that were partly offset by negative contributions from private inventory investment, federal government spending, exports, and state and local government spending. Imports, which are a subtraction in the calculation of GDP, decreased.
The deceleration in real GDP in the fourth quarter primarily reflected downturns in private inventory investment, in federal government spending, in exports, and in state and local government spending that were partly offset by an upturn in nonresidential fixed investment, a larger decrease in imports, and an acceleration in PCE.
Motor vehicle output added 0.18 percentage point to the fourth-quarter change in real GDP after subtracting 0.25 percentage point from the third-quarter change. Final sales of computers added 0.10 percentage point to the fourth-quarter change in real GDP after adding 0.11 percentage point to the third-quarter change.
<a href="http://www.bea.gov/newsreleases/national/gdp/gdpnewsrelease.htm">Click here for the full release &gt;</a>

US GDP RISES 0.4% IN Q4

<div class="KonaFilter image-container float_right"><div class="image">REUTERS/Stefan Wermuth</div></div>This morning we got the news that the <a href="http://www.businessinsider.com/us-trade-data-for-november-2013-2014-1">U.S. trade deficit has shrunk to its lowest level since October 2009</a>.
Oil imports fell 1.9%, helping the deficit shrink to $34.3 billion (economists were looking for the deficit to come in at $40 billion).
Now some of Wall Street's top analysts are revising their fourth quarter GDP predictions on the news.
"We revised up our Q4 GDP tracking forecast to 3.0% from 2.3% following November international trade data," Credit Suisse's Neal Soss wrote clients. "The quarter-to-date real goods deficit is tracking -$35bn (annual rate) narrower than the Q3 average, implying a significant net export contribution to fourth quarter growth."
Joseph LaVorgna of Deutsche Bank <a href="https://twitter.com/Lavorgnanomics/statuses/420553257183084544">pushed his shop's Q4 GDP call to 4.0%</a> after the report. High Frequency Economics' Jim O'Sullivan wrote clients, "As of now our our 2.5% estimate for 4Q real GDP growth looks too low."
"The November trade data would suggest Q4 GDP growth is likely stronger than we expected," GMP Securities' Adrian Miller wrote. "Indeed, while we have previous forecasted a 2.0% Q4 growth rate following Q3's +4.1%, the trade data, unless offset in December could lift Q4 growth by 30bp to 40bp. Hence we are revising our Q4 estimate to 2.3%."

Analysts Are Raising Their GDP Predictions After This Morning's Monster Trade Report

<div class="image-container float_right" style="width:400px"><div class="image"></div>Pete Souza/Official White House photo</div>The advance estimate for fourth-quarter U.S. <keyword id="35050" type="CITY" weightage="60" keywordseo="gdp">GDP</keyword> is out.
The economy contracted 0.1 percent in Q4 versus economists' consensus expectations of a 1.1 percent expansion.
Personal consumption growth came in at 2.2 percent – slightly higher than consensus estimates of 2.1 percent – but was driven largely by a 13.9 percent advance in the consumption of durable goods.
Government spending was the largest driver of the economic contraction in the fourth quarter, subtracting 1.33 percentage points from Q4 GDP growth and falling 6.6 percent. Federal spending fell 15.0 percent, led by a 22.2 percent drop in defense spending. Federal spending on nondefense items was actually up 1.4 percent. State and local spending fell 0.7 percent.
The drawdown in private inventories was the second culprit behind the contraction, subtracting 1.27 percentage points from Q4 GDP growth after adding 0.73 percentage points to Q3 GDP growth.
However, fixed business investment surged 9.7 percent after advancing only 0.9 percent in Q3. The investment surge added 1.18 percentage points to Q4 GDP growth.
While personal consumption expenditures were the biggest positive contributor to Q4 GDP growth, adding 1.53 percentage points, they were driven largely by the spike in consumption of durable goods, up 13.9 percent from Q3. Consumption of nondurable goods was only up 0.4 percent while consumption of services was up 0.9 percent.
Exports fell 5.7 percent while imports retreated 3.2 percent. Net trade subtracted 0.81 percentage points from Q4 GDP growth.
The GDP Price Index came in at 0.6 percent – below expectations – and core PCE came in at 0.9 percent, right in line with expectations.
Below are highlights <a href="http://www.bea.gov/newsreleases/national/gdp/gdpnewsrelease.htm">from the release:</a>
Real gross domestic product -- the output of goods and services produced by labor and property located in the United States -- decreased at an annual rate of 0.1 percent in the fourth quarter of 2012 (that is, from the third quarter to the fourth quarter), according to the "advance" estimate released by the Bureau of Economic Analysis. In the third quarter, real GDP increased 3.1 percent.
The Bureau emphasized that the fourth-quarter advance estimate released today is based on source data that are incomplete or subject to further revision by the source agency (see the box on page 4 and the "Comparisons of Revisions to GDP" on page 5). The "second" estimate for the fourth quarter, based on more complete data, will be released on February 28, 2013.
The decrease in real GDP in the fourth quarter primarily reflected negative contributions from private inventory investment, federal government spending, and exports that were partly offset by positive contributions from personal consumption expenditures (PCE), nonresidential fixed investment, and residential fixed investment. Imports, which are a subtraction in the calculation of GDP, decreased.
The downturn in real GDP in the fourth quarter primarily reflected downturns in private inventory investment, in federal government spending, in exports, and in state and local government spending that were partly offset by an upturn in nonresidential fixed investment, a larger decrease in imports, and an acceleration in PCE.
Final sales of computers added 0.15 percentage point to the fourth-quarter change in real GDP after adding 0.11 percentage point to the third-quarter change. Motor vehicle output added 0.04 percentage point to the fourth-quarter change in real GDP after subtracting 0.25 percentage point from the third-quarter change.
<a href="http://www.bea.gov/newsreleases/national/gdp/gdpnewsrelease.htm">Click here for the full release &gt;</a>

US ECONOMY SHRINKS: GDP FALLS 0.1% IN Q4

<ul class="summary-list"><li>US <keyword id="6354971" type="DEFINITION" weightage="60" keywordseo="gross-domestic-product">gross domestic product</keyword> grew at an annualized rate of 4% in the fourth quarter, the Commerce Department said Thursday.</li><li>Economists surveyed by Bloomberg expected growth to come in at 4.2%.</li><li>The gains come after economic reopening drove a record-high growth rate of 33.1% in the third quarter.</li></ul>The US <keyword id="34412" type="ORGANIZATION" weightage="100" keywordseo="economy">economy</keyword> grew less than anticipated in the last three months of 2020 as the moderating pace of recovery padded against the coronavirus's dire resurgence.US gross domestic product grew at an annualized rate of 4% in the fourth quarter, the Commerce Department said Thursday. Barring last quarter's record leap, the end-of-year gain is the largest since 2014. Economists surveyed by Bloomberg expected growth of 4.2% through the period.The reading represents how much the economy would've grown had the fourth-quarter pace lasted for 12 months. The Thursday data marks a sharp slowdown from the third quarter's record 33.1% annualized rate of growth.The Commerce Department is slated to report two more estimates of fourth-quarter growth in the coming months. The rate shown in Thursday's data is likely to be revised in future updates.Read more: <a href="https://www.businessinsider.com/stock-picks-to-buy-expected-outperform-earnings-2022-morgan-stanley-2021-1" target="_blank" rel="noopener">MORGAN STANLEY: Buy these 17 stocks with strong earnings that are expected to outperform into 2022 even if the broader market sinks</a>While the government data reveals a significant slowing in the economic recovery, it still shows the US rebounding through the deadliest wave of the pandemic yet. The last three months of 2020 saw state and local governments impose stricter lockdown measures to curb the virus's spread. Softer consumer spending and weak service-sector activity suggest the pace of improvement nearly ground to a halt heading into the new year."Most or maybe all of that economic growth was packed into October, with November and December growth declining or even reversing into losses," Robert Frick, corporate economist at Navy Federal Credit Union, said. "The terrible third wave of COVID-19 caused these problems, and thankfully, cases seem to have crested."The labor market fared particularly poorly at the end of 2020. The country <a href="https://www.businessinsider.com/december-jobs-report-140000-payrolls-lost-unemployment-rate-coronavirus-recession-2021-1">lost 140,000 payrolls</a> in December, officially paring gains made in months prior as COVID-19 restrictions cut into hiring activity. The unemployment rate held steady at an elevated 6.7%.All the while, COVID-19 cases in the US leaped to record-highs and prompted fresh economic fallout. Daily case counts edged up against 250,000 near the end of 2020 before falling in the new year. Hospitalizations also peaked and total deaths reached 336,802 through the quarter, according to <a href="https://covidtracking.com/data/national/deaths">The COVID Tracking Project</a>.To be sure, <keyword id="35050" type="CITY" weightage="60" keywordseo="gdp">GDP</keyword> still sits just below pre-pandemic highs.Read more: <a href="https://www.businessinsider.com/bitcoin-crypto-investing-strategy-portfolio-management-advice-top-asset-managers-2021-1">4 heavyweight investing firms answer the 5 most burning bitcoin questions facing investors as the cryptocurrency sees unprecedented volatility</a>On the bright side, the country has cleared some hurdles in distributing COVID-19 vaccines. The US completed an average 1.21 million vaccinations per day last week, according to <a href="https://www.bloomberg.com/graphics/covid-vaccine-tracker-global-distribution/">Bloomberg data</a>, outpacing the previous goal of 1 million. Roughly 25.6 million shots have been given so far.Early indicators also suggest the $900 billion stimulus package approved in late December is also having a positive effect on growth. Spending <a href="https://www.businessinsider.com/us-consumer-spending-climbs-fiscal-stimulus-checks-unemployment-benefits-bofa-2021-1">leaped year-over-year</a> through the first two weeks of January as stimulus checks and expanded unemployment benefits included in the bill hit households, Bank of America economists said January 22. Stimulus recipients and those earning less than $50,000 exhibited the largest improvements.Additional aid could further accelerate growth as early as the current quarter. President Joe Biden continues to push for a $1.9 trillion measure that includes expanded unemployment benefits, $1,400 direct payments, and state and local government aid. Democrats have indicated that, while they'd prefer to pass the bill with Republican support, they're also <a href="https://www.businessinsider.com/democrats-biden-stimulus-without-gop-votes-reconciliation-2021-1">willing to use budget reconciliation to pass a package</a>.Senate Majority Leader Chuck Schumer said earlier this week that "time is of the essence" for approving new economic relief. Democrats largely see the mid-March expiration date for boosted unemployment benefits as a loose deadline for legislative action.Read more: <a href="https://www.businessinsider.com/stocks-to-buy-renewables-energy-stocks-governments-spend-goldman-sachs-2021-1">GOLDMAN SACHS: Buy these 26 renewable-energy stocks best-positioned to benefit from increased spending as governments aim for net-zero emissions</a>

US GDP grew a weaker-than-expected 4% in the 4th quarter as COVID-19 cases soared

<table class="image-container float_right" width="200"><tr><td><div class="image"></div>Bloomberg TV</td></tr></table>Later this morning, we'll get the advanced reading of Q4 <keyword id="35050" type="CITY" weightage="60" keywordseo="gdp">GDP</keyword>.
Consensus is calling for <a href="http://www.businessinsider.com/adp-gdp-fomc-2013-1">1.0 percent growth</a>.
In his morning research round-up, UBS global economist Paul Donovan notes that the firm expects GDP to come in way below consensus.
Here are the bullets from <a href="http://www.ubs.com/global/en/about_ubs/follow_ubs/paul_donovan/2013/1/30/us-focus.html?campID=RSS">today's round-up</a>:
<ul class="list-bullet">
<li>Australia's Prime Minister has announced that the general election will be held in September of this year (sic). We have nearly nine months of campaigning to enjoy. Markets have not reacted too much to the announcement, but the risk of market moving populist policies is there.</li>
<li>The US Federal Reserve is not expected to change anything - though this is the first meeting of the new voting membership of the FOMC. We would look for liquidity tightening to extend later this year as the economy moves towards trend growth.</li>
<li>US Q4 growth is expected to come in weaker than consensus at 0.7%, reflecting inventory use instead of production and a drag from net exports. The former is a consequence of the autumn storms. The latter is foreshadowed in some of the Asian trade data.</li>
<li>Spanish Q4 GDP is widely expected to be negative. Indeed, we are looking for two consecutive years of negative Spanish GDP for the first time since the 1950s. Meanwhile the UK will offer credit and mortgage data.</li>
</ul>

UBS Expects Q4 GDP To Come In Way Below Consensus

<div class="image-container float_right" style="width:400px"><div class="image"></div><a href="http://www.flickr.com/photos/theeerin/2146608712/">TheeErin / Flickr</a></div>Of <a href="http://www.businessinsider.com/economic-data-february-28-2013-2">today's economic data releases</a>, the revised Q4 <keyword id="35050" type="CITY" weightage="60" keywordseo="gdp">GDP</keyword> report will be the most closely watched.
Last month, everyone was stunned when when the Bureau of Economic Analysis told us that <a href="http://www.businessinsider.com/us-advance-q4-gdp-2013-1">GDP grew by -0.1 percent in Q4</a>. Economists were looking for a reading of 1.1 percent.
Thanks to some additional data, economists are now expecting that number to be revised to +0.5 percent when the BEA releases its new GDP report later this morning.
But even that number is likely to be thrown out when we get revisions in March.
Furthermore, there's a mammoth revision coming in July that could make today's report completely moot.
Deutsche Bank's Joe LaVorgna:
The second snapshot of Q4 real GDP is expected to show a modest upward revision because of stronger than previously reported readings on construction spending and net exports. This should offset what is likely to be a downward revision to inventory positions. The fact that the latter are so low bodes well for future production. Indeed, that is what the January durable goods data suggest. Remember Q4 real GDP will be revised again next month and more importantly, it will be subject to further and possibly more significant revision in late July when the Commerce Department conducts its roughly semi-decade comprehensive benchmark revisions.
We'll cover today's BEA release live when it comes out at 8:30 AM ET.

Today's GDP Report Is Crucial, But There's One Reason Why You Should Ignore It

<div class="image-container float_right" style="width:400px"><div class="image"></div><a href="http://commons.wikimedia.org/w/index.php?title=File:TEENAGERS_LOOK_AT_SALE_MERCHANDISE_DURING_A_CRAZY_DAYS_PROMOTION_BY_MERCHANTS_ON_MINNESOTA_STREET_IN_DOWNTOWN_NEW_ULM..._-_NARA_-_558194.tif&amp;page=1">Wikimedia Commons</a></div>Famously, Q4 <keyword id="35050" type="CITY" weightage="60" keywordseo="gdp">GDP</keyword> came in at -0.1%, marking the first quarterly contraction since the financial crisis. The culprit was a sharp slowdown in government spending, predominantly military.
Anyway, we pointed out at the time that the report wasn't that bad, since private sector activity was strong. And since then, some shops have cranked up their estimates of what Q4 will be revised to. In the end, it will probably be revised to solidly positive.
The really good news is that the private sector looks stronger and stronger.
In a note today, Deutsche Bank explains that thanks to today's retail sales numbers (which had nice revisions to earlier months) the end demand part of the Q4 GDP picture is looking nice.
With a more complete picture of Q4 GDP following recent reports on retail sales, construction spending, international trade and inventories, the overall growth figure for last quarter remains unchanged at -0.1%. However, the underlying growth profile is somewhat improved, given that demand appears stronger than initially reported. Indeed, final sales (GDP less inventories) now look to be significantly stronger (1.9%) relative to what was initially reported (1.1%). Previously we highlighted that the acceleration in the underlying growth trend was more meaningful than the contraction in overall GDP, and this notion is even more compelling in light of revisions. The resilience of the economy is evident in two key series: retail sales and jobless claims.
Of course, the jury remains "out" on whether the expiration of the payroll tax holiday and higher gas prices will sap the consumer. For now, things look good.

Last Quarter's GDP Report Was Even Stronger Than We Realized

<div class="KonaFilter image-container display-table"><div><div class="image">REUTERS/Chris Keane</div></div></div>This morning we learned the U.S. trade deficit unexpectedly ballooned by 6.9% in April.
The headline figures looked good - imports for consumer goods were all up. 
But <a href="http://www.businessinsider.com/trade-balance-april-2014-2014-6">analysts found</a> the unexpected surge in the gap was actually more the reflection of flagging exports, which shrank 0.2%. 
As a result, many firms have begun to revising their GDP estimates downward.
Here's the count so far:
<ul>
<li>Goldman Sachs: Q2 GDP revised down to 3.4% from 3.8%; Q1 GDP revised down to -1.1% from -0.9%.</li>
<li>Barclays: Q2 GDP revised down to 2.9% from 3.0%</li>
<li>Macroeconomic Advisers: Q1 GDP revised down to -1.4% from -0.9%.</li>
</ul>
"Makes you wonder if GDP will rebound to 3% in the second quarter let alone the 4% whisper numbers," Bank of Tokyo-Mitsubishi's Chris Rupkey mused in a note. "Trade data had its annual revision so the widening was not as bad as it looks but trade will be a drag on second quarter GDP."
Not everyone believes the data will have a material impact on growth. JP Morgan held firm on its estimate for Q2 GDP of 3.0%, though they added the new trade data "adds some modest downside risk" to that forecast.
Capital Economics also left its Q2 GDP estimate unchanged, arguing that the flagging trade data is surpassed by jumps in sales and inventories. They also mention <a href="http://www.businessinsider.com/ism-non-manufacturing-may-2014-2014-6">Wednesday's solid ISM non-manufacturing survey reading</a>. "A weighted average of the two ISM activity indices is now consistent with a rebound in annualized GDP growth to around +3.0% in the second quarter from -1.0% in the first," CE said. "We still think it could be closer to 3.5%."
The next major piece of the GDP puzzle will come Friday when we get non-farm payrolls for May. Estimates are for a reading of 213,000, down from 288,000.

The Downward GDP Revisions Have Begun

<div class="image-container float_right" style="width:350px"><div class="image"></div><a href="http://commons.wikimedia.org/wiki/File:Falling_surfer.jpg">Wikimedia Commons</a></div>Markets sold off a bit today.
First the scoreboard:
Dow: 13,910, -44.0, -0.3 percent S&amp;P 500: 1,501, -5.8, -0.3 percent NASDAQ: 3,142, -11.3, -0.3 percent
And now the top stories:
<ul>
<li>This morning, the Bureau of Economic Analysis published its first reading of <a href="http://www.businessinsider.com/us-advance-q4-gdp-2013-1">Q4 2012 GDP</a>. And it was a stunner. According to their measure, GDP unexpectedly fell by 0.1 percent. Economists were looking for a 1.1 percent growth rate.</li>
<li><a href="http://www.businessinsider.com/slower-government-spending-crushed-gdp-2013-1">Government spending</a> was the main driver of contraction, subtracting 1.3 percentage points from Q4 GDP growth and falling 6.6 percent. Federal spending fell 15.0 percent, led by a 22.2 percent drop in defense spending. </li>
<li>Bank of America economist <a href="Outside%20of%20these%20two%20very%20volatile%20components,%20underlying%20growth%20improved%20with%20a%20solid%20gain%20in%20business%20investment.%20We%20believe%20today’s%20report%20suggests%20upside%20risk%20to%20our%20forecast%20of%201.0%%20for%20Q1%20GDP.%20%20Read%20more:%20http://www.businessinsider.com/michelle-meyer-gdp-was-grossly-distorted-and-you-should-fade-the-headline-2013-1">Michelle Meyer noted</a> that today's GDP report was "grossly distorted" by government spending and inventories. "Outside of these two very volatile components, underlying growth improved with a solid gain in business investment," she wrote. "We believe today’s report suggests upside risk to our forecast of 1.0% for Q1 GDP." </li>
<li><a href="http://www.businessinsider.com/todays-shock-negative-gdp-report-really-wasnt-that-bad-2013-1">Personal consumption</a>, which is arguably the most important component of GDP, grew at a 2.2 percent rate, which was slightly stronger than consensus estimates of 2.1 percent. This was was driven largely by a 13.9 percent advance in the consumption of durable goods.</li>
<li>The Federal Reserve concluded its first <a href="http://www.businessinsider.com/january-fomc-statement-2013-1">Federal Open Market Committee (FOMC)</a> meeting of the year. And they had very little to say that was new. There was no change in their benchmark rate and they said they would continue its purchases of Treasury and mortgage-backed (i.e. quantitative easing).</li>
<li>"Information received since the Federal Open Market Committee met in December suggests that growth in economic activity paused in recent months, in large part because of weather-related disruptions and other transitory factors," they said. That probably explains <a href="http://www.businessinsider.com/fed-heres-why-todays-gdp-report-stunk-2013-1">why Q4 GDP came up short</a>. </li>
<li><a href="http://www.businessinsider.com/live-facebook-earnings-2013-1">Facebook announces</a> its quarterly earnings after the <keyword id="149333" type="UNKNOWN" weightage="60" keywordseo="closing-bell">closing bell</keyword>. Follow the release live on Business Insider. </li>
<li>Don't Miss: <a href="http://www.businessinsider.com/jpm-david-kelly-problems-with-easy-money-2013-1">JPM's Kelly: These Charts Show That Easy Fed Money Is Doing More Bad Than Good &gt;</a></li>
</ul>

STOCKS FALL AFTER GDP DISAPPOINTS: Here's What You Need To Know

<div class="KonaFilter image-container float_right"><div class="image on-image">Reuters</div></div>We recently told you how <a href="http://www.businessinsider.com/gas-prices-offset-the-government-shutdown-2013-10">falling gasoline prices provided a cushion</a> to the U.S. economy during the government shutdown
Now Macroeconomic Advisers has further quantified the gains from falling fuel costs.
In a new note, they revise their Q3 GDP estimate up 3/10ths to a "solid" 2.7%.
A major reason, they say, is lower-than-expected consumer prices, thanks in part to declines in gasoline:
Falling energy prices are contributing to gains in real wealth and income: Retail gasoline prices have declined more than 30 cents / gallon over the last two months, to $3.28/gallon as of Thursday, according to the national average pump price compiled for AAA. November gasoline futures have declined by a similar amount. We estimate that the CPI for gasoline declined by roughly 3% to 4% in October, after seasonal adjustment. If retail prices hold near current levels, the CPI for gasoline in November would be roughly unchanged after seasonal adjustment. Over the last eight weeks, the spot price of WTI has declined approximately $15 to near $95/barrel.
They go on to say that final sales to private domestic purchasers will improve from 2.3% in Q3 to 3.2% in Q4 thanks to a jump to 3% from 1.7% in personal consumption expenditures, which in turn should be, "aided by falling energy prices and large increases in housing and equity wealth."
The group is holding Q4 GDP forecasts at 1.7%, citing "the government shutdown, ongoing and previously anticipated declines in federal spending, and a negative swing in inventory investment that we expect will subtract approximately 3/4 of a percentage point from GDP growth."
Overall, they say, GDP growth will remain "moderate in the near term."

Gas Prices Are Declining, And It's Turning Into Real Wealth Gains For Americans

<div class="KonaFilter image-container"><div class="image">Renaissance Macro</div></div>
January retail sales data were not good by any measure, and they have economists trying to fit the puzzle pieces together today.
The chart above - from Neil Dutta, head of U.S. economics at Renaissance Macro - does an excellent job of illustrating the disconnect. Recent retail sales data just don't square with recent jobs data.
"Something has to give," says Dutta.
"There is a widening disconnect. Either retailers stick with it and stay confident on the expectations that sales will improve, or they will be forced to cut employment dramatically."
At present, Q4 GDP is tracking 2.4% down from the initial estimate of 3.2%, a sharp cut. However, aggregate hours in Q4 were revised up because of stronger job growth. Indeed, aggregate hours expanded 1.9% in Q4. Meanwhile, business productivity rose 2.6%. Combining the two -- total hours plus output per hour -- implies that growth rose 4.5% in Q4. Something has to give. Either GDP goes up, aggregate hours fall, or productivity contracts.

Something Has To Give Here

On Wednesday, the Bureau of Economic Analysis will release its first estimate of Q2 GDP.
The average economist on Wall Street is <a href="http://www.businessinsider.com/monday-scouting-report-july-28-2014-2014-7">looking for 3.0% growth</a>, after the 2.9% drop in Q1. Citi, Barclays, Nomura, Goldman Sachs, and UBS are among the big names forecasting between 2.9% and 3.1% growth.
Deutsche Bank's Joe LaVorgna is sticking his neck out, predicting the figure will come in at 4.2%.
In a new note, the LaVorgna explains why there's a good chance that estimate will prove low: it assumes a conservative rate of productivity. 
Productivity is defined as GDP over hours worked. Recent data suggests Q2 hours climbed at a 3.8% annualized rate. Assuming a 4.2% GDP rate, we get productivity growth of 0.4%. But major declines in productivity are often followed by a snapback the following quarter. And data show productivity fell 5.8% in Q1. That could yet be revised even lower. 
Here's the chart showing the yo-yo effect:<div class="KonaFilter image-container"><div class="image">Deutsche Bank</div></div>"Unless Q1 GDP is revised up, Q1 productivity is poised to be revised significantly lower, thereby increasing the probability of a Q2 productivity snapback," LaVorgna writes. "While hours could be revised lower, this would run counter to the recent trend of upward revisions."
A 5.8% productivity drop would be the second worst since World War II. After productivity dropped by 11.2% in Q3 1947, it was swiftly followed by an increase of 17.8% in Q4.
For LaVorgna, we can expect a similar rebound Wednesday.

You Searched For "Q4 GDP" and got 14 results

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