Consumers “still suffering” as US GDP posts solid rise

Summary:  US GDP up 1.0% in December quarter; consumers “still suffering”; GDP price deflator annual rate slightly higher.

US GDP growth slowed in the second quarter of 2019 before stabilising at about 0.5% per quarter.  At the same time, US bond yields suggested future growth rates would be below trend. The US Fed agreed and it reduced its federal funds range three times in the second half of 2019. Pandemic restrictions in the June quarter sent parts of the US economy into hibernation; the lifting of those same restrictions sparked a rapid recovery. Growth rates now appear to be reverting to more normal levels.

The US Bureau of Economic Analysis has now released December quarter “advance” GDP estimates and they indicate the US economy expanded by 1.0% or at an annualised growth rate of 4.0%. The figure was broadly in line +1.0% (+4.1% annualised) which had been generally expected but substantially lower than the September quarter’s 7.5% expansion.

“Overall, the data show consumers are still suffering from the pandemic. Restrictions, a weakening jobs market and the end of the Cares Act were the driving factors,” said ANZ economist Adelaide Timbrell.

US GDP numbers are published in a manner which is different to most other countries; quarterly figures are compounded to give an annualised figure. In countries such as Australia and the UK, an annual figure is calculated by taking the latest number and comparing it with the figure from the same period in the previous year. The diagram above shows US GDP once it has been expressed in the normal manner, as well as the annualised figure.