Gross Domestic Product (GDP) is the broadest measure of aggregate economic activity and encompasses every sector of the economy. Why Investors Care
| Released on 3/27/08 For Q4 Final 2007 | |||||||||||||||||||||||||
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Highlights
For the final revision, fourth quarter real GDP was unrevised while the key price figure was tapped down a bit. Real GDP was unrevised at an annualized 0.6 percent increase and followed a 4.9 annualized increase in the prior quarter. The latest number came in matched the consensus forecast. The fourth quarter GDP price index was revised down to 2.4 percent annualized from the previous estimate of 2.7 percent and compared to the market forecast for a 2.7 percent increase. Given that the final revision to GDP is so backward looking, the only notable factoid out of the report is that the economy stayed out of negative territory through 2007 - unless annual revisions at mid-year end up telling a different story. Meanwhile and more current, initial jobless claims came in strong than expected and that will be the market story for now.
The deceleration in real GDP growth in the fourth quarter primarily reflected a downturn in inventory investment and decelerations in exports, in federal government spending, and in personal consumption expenditures that were partly offset by a downturn in imports.
For more inflation detail, the overall PCE price index was revised down to an annualized 3.9 percent from the prior estimate of 4.1 percent while the core PCE price index was revised to an annualized 2.5 percent from the previous estimate of 2.7 percent.
Real GDP for the fourth quarter was left unrevised in the first revision at an annualized 0.6 percent and followed a robust 4.9 annualized increase in the third quarter. Normally, a final revision to a quarter is not of much interest but the quarter was so weak that it is still possible that there could be enough of a downward revision to give us a negative quarter. The data are old news and there is not much difference in reality between an incremental rise and an incremental decrease but the final revision could make a difference in terms of whether some view a recession as having begun late last year. The fourth quarter GDP price index came in at 2.7 percent.
Real GDP Consensus Forecast for final Q4 08: 0.6 percent annual rate
Range: +0.5 to +0.9 percent annual rate
GDP price index Consensus Forecast for final Q4 08: +2.7 percent annual rate
Range: +2.7 to +2.7 percent annual rate
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Real GDP growth is always quoted at a quarterly annual rate. It measures how much the economy has grown over a three-month period. Quarterly growth rates are often volatile; consequently, economists also like to look at the year-over-year growth in GDP. The yearly changes tend to be more stable. |
![[Chart]](chart_1.gif)
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It is common to compare quarterly changes at annual rates in the GDP price index. These can be volatile, just like the quarterly swings in real GDP growth; as a result, the trend in inflation is better determined by year- over- year changes. |
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