WASHINGTON—Fourth quarter economic growth remained at its third-quarter pace of 2.1% according to the Commerce Department's second estimate.
NAFCU Chief Economist and Vice President of Research Curt Long attributed the growth to "consumer spending, which slowed modestly, trade, and government spending."
"Revisions were neutral on net. Inventories and consumer spending on services were revised upward while consumer spending on goods and investment in intellectual property were revised downward," said Long. "Overall, economic indicators show little reason for concern."
According to the updated estimate, contributions to growth of real GDP came from gains in net exports (+1.5%), consumption (+1.2%), and government spending (+0.5%). Long attributed reductions in growth to inventories (-1%) and business investment (-0.3%).
Long noted that the unreleased fourth quarter measures for real gross domestic income and nominal corporate profits are expected to be included in future GDP releases.
‘Serious Threat’
"The COVID-19 virus clearly represents a serious threat to consumer and business sentiment, and to the recovery in general," added Long. "Statements from Fed officials thus far indicate a desire to see the impact manifest in the real economy before cutting rates, despite mounting bets from financial markets that cuts are forthcoming."
Based on the comments made by Federal Reserve officials, Long shared NAFCU's expectation that a rate cut will likely occur in the second quarter.
Additionally, PCE inflation, the Fed's preferred inflation metric, "slowed somewhat," dropping from 1.5% in the third quarter to 1.3% in the fourth quarter. Meanwhile, core PCE inflation, excluding food and energy, fell to 1.2%.