We’ve seen a lot of GDP data recently that, at first look, may seem a bit concerning. But if we take a moment for analysis, much of the news is actually good for the economy and the markets.
-Marco Pirondini, Pioneer
- The Q4 U.S. GDP number actually decreased 0.1%. When you break down the components of this GDP number you see that the private sector actually expanded, around 2 1/2%, consistent with its rate of the last few quarters, while the public sector contracted after a strong Q3 – not unusual after an election.
- The inventory contribution was negative because the final sale of goods has actually increased to 5.6%, driving inventories down. This is actually a very good number. It means that the U.S. economy in the private sector is actually accelerating. We think that these falling inventories will probably rebound in the first quarter, which will be better than what most people expected.
- We had a reduction in disposable income in the first part of the year, because of all the tax increases. To see that the economy is able to expand despite this increase in taxes is very important. We have also seen an improving employment number, which is consistent with an improving economy.