Overall, today’s GDP report is consistent with a wide range of indicators showing continued labor market strengthening and improvement in household and corporate balance sheets. This estimate of fourth-quarter GDP affirms the robust underlying growth of the largest and most stable components of economic output, while the same volatile factors that increased growth in the third quarter subtracted from it in the fourth. Indeed, the sum of private consumption and fixed investment rose at the fastest pace in four years, despite the lower rate of overall growth. Personal consumption expenditures, which account for more than two thirds of output, grew 4.4 percent at an annual rate in the fourth quarter—the fastest single quarter since 2006. Despite the solid trend, the economy faces headwinds from weak growth abroad—as well as the lingering effects of winter weather—that economists generally expect to reduce GDP growth temporarily in the first quarter of 2015. There is more work to do to ensure that the recovery’s strong underlying trend is sustained and shared across a broad range of households. The President’s FY2016 Budget lays out a strategy to strengthen our middle class and help America's hard-working families get ahead.
FIVE KEY POINTS IN TODAY’S REPORT FROM THE BUREAU OF ECONOMIC ANALYSIS
1. Real gross domestic product (GDP) grew 2.2 percent at an annual rate in the fourth quarter of 2014, according to the third estimate from the Bureau of Economic Analysis. The report reflects especially fast growth in personal consumption expenditures (revised further upward in the final release) and continued strong increases in residential and business fixed investment. At the same time, the large third-quarter increases in Federal defense spending and net exports retreated somewhat in the fourth quarter. Despite the recent volatility of such transitory components—and though headwinds from abroad and winter weather may slow growth in the first quarter of 2015—the solid underlying trend of strong consumption and investment growth persists (see point 5).