Submitted by Mark Hanna
Courtesy of MarketMontage. View original post here.
You might remember a vast majority of Q3 GDP was a massive surge in defense spending by the federal government – of course this number was reported just before the election. (wink wink) Well we have a reversion of mean to that number today as defense spending fell to a 40 year low.
National defense decreased 22.2 percent, in contrast to an increase of 12.9 percent.
And that lead to a -0.1% first pass on Q4 GDP; lowest since late 2009. Of course the talk is brewing in D.C. that the sequester might actually hit since our politicos can’t agree on anything and that will hit defense further, but the market doesn’t care about such issues. Heck it might be a positive since it means QE forever. But if you have been following along the past few years you know the massive federal govt deficits have been a major driver of GDP. So any reduction in such spending will of course hurt the aggregate numbers. Anyhow futures dinged a bit but in this current atmosphere probably will be forgotten in 30 minutes. The other biggie was a drop in exports which is strange considering how that is supposedly driving profits for U.S. multinationals. Maybe they blame Sandy for that one.
Real exports of goods and services decreased 5.7 percent in the fourth quarter, in contrast to an increase of 1.9 percent in the third.
Full report here.
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 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.
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