Part 1: You down with GDP? What's up with economic growth (a look at the 4th quarter GDP report)
Bottom Line: Friday's GDP Report, was initially a bit of a disappointment and upon further review something to get excited about. Why? Let's break it down in a way that hopefully makes sense...
First thing's first. The actual number reported was 2.6%. That's the best 4th quarter in years if it doesn't improve (and better than the 2.5% estimate by economists going into the 4th quarter) and that's the worst news in this report (which tells you that the rest of the story is a good one). First here's an overview...
The 4th quarter growth rate of 2.6% was the best end to a year since 2013. Since the end of the Great Recession the average growth rate for the 4th quarter had been 2.1% - with the prior two years only averaging a paltry 1.1%. So already the 4th quarter economy grew about 24% stronger than what we'd been pacing since the end of the recession. But here's the next key cog from the report:
The Bureau emphasized that the fourth-quarter advance estimate released today is based on sourcedata that are incomplete or subject to further revision by the source agency (see "Source Data for theAdvance Estimate" on page 3). The "second" estimate for the fourth quarter, based on more completedata, will be released on February 28, 2018
Why does that potentially matter? Take the 2nd quarter of 2017. The advance report showed 2.6% growth with the final showing 3.1% The 3rd quarter advance showed growth of 3% that finished at 3.2%. In other words, they've been underestimating the economy with the advance report since the economy broke out last year. Don't be surprised to see another big leap forward with the revised report. That's not the end of the potentially good news however...In the 2nd part of this story I'll break down the impact to you.