US GDP flat in Q4 -- another ambiguous sign

30 Jan 2013 by Jim Fickett.

Today the BEA reported GDP through Q4. The headlines were all about the economy shrinking in Q4, and the reported change in real GDP from Q3 to Q4 was indeed -0.1 (at an annual rate). This is not a good sign, and might indeed indicate that the US is in a stall. But a more balanced interpretation is that it is an ambiguous sign. One advance estimate of one noisy indicator (the quarter-to-quarter change) is barely negative. This is certainly not something to make one optimistic about the state of the economy, but it is not strongly negative, either.

There are some signs that there was a mini-slowdown last fall contributing to the poor showing of Q4 GDP, and that we are now past the worst of it. Here is the Aruoba-Diebold-Scotti current conditions index:

And note that private demand continued to grow normally in Q4. Overall I think the picture is unchanged – the rocky recovery is likely to continue, though it is fragile and could be derailed rather easily.