US GDP jumps past forecasts, but only on account of inventory building

America’s economy grew much more quickly than expected towards the end of last year, albeit only due to inventory building.
According to the US Department of Commerce, in seasonally adjusted terms, US gross domestic product expanded at a quarterly annualised pace of 6.9%, following an increase of 2.3%.

That was much better than the 5.5% increase anticipated by economists, but inventory building contributed a “huge” 4.9 percentage points to the rate of growth, Ian Shepherdson, chief economist at Pantheon Macroeconomics, said.

By components of aggregate demand, personal consumption expenditures added 2.25 percentage points to the rate of GDP growth, gross private domestic investment added 5.15 points, net foreign trade did not make a contribution either way and government spending subtracted half a point.

As regards inflation, the price deflator for personal consumption expenditures rose at a clip of 6.5%, after a 5.3% rise during the preceding quarter.

At the core level, which excludes food and energy, the PCE price index was up by 4.9%, against a 4.6% increase during the third quarter.

Looking out to the first quarter, Shepherdson was expecting pay back as companies stopped building inventories and Omicron restrained spending on discretionary services.

Thd economist also highlighted the “striking” 23% surge in the price of business structures, which he said pushed the GDP price deflator higher and said was probably the result of shortages of materials.

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