U.S. Initial Claims remain low, Q4 GDP revised higher with positive detail
An already strong Q4 GDP outcome has been revised unexpectedly higher, to 3.4% from 3.2% though core PCE prices have been revised down to a target-consistent 2.0% from 2.1%. Initial claims remain low, falling to 210k from 212k, but there was a modest rise in continued claims to an 8-week high of 1.819m from 1.795m. Trend in both claims series has little direction.
The upward revision to GDP was led by consumer spending, which continues to show persistent strength, now rising by 3.3% rather than 3.0% with an upward revision to services to 3.4% from 2.8% outweighing a downward revision to goods to 3.0% from 3.2%.
Consumer spending continued to outpace real disposable income, which was revised lower to 2.0% from 2.2%, but the recent tendency of GDP to outperform Gross Domestic Income was not repeated in Q1, with the latter, this its first estimate for Q1, rising by a very strong pace of 4.8%, its highest since Q4 2021.
Business investment was revised higher to 3.7% from 2.4% with all three subcomponents revised higher, while government as revised up to 4.6% from 4.2% led by state and local. Net exports were revised lower on a sharp downward revision to service experts while inventories saw a significant downward revision, which reduces the need to trim inventories in Q1.
Final sales (GDP less inventories) were revised up to 3.9% from 3.5% and final sales to domestic buyers (GDP less inventories and net exports) to 3.5% from 3.1%, both showing underlying strength in the economy.
