Fourth-Quarter Growth, Sentiment Cool: U.S. Economic Takeaways

  • GDP rises 0.7% on modest downshift in consumer spending
  • Michigan sentiment gauge weakens on stock-market concerns

What you need to know about Friday’s U.S. economic data:


  • Rose 0.7 percent (forecast of 0.8 percent) after 2 percent in 3Q
  • Consumer spending climbed 2.2 percent after 3 percent gain in 3Q
  • Non-residential business fixed investment fell 1.8 percent after 2.6 percent advance
  • Trade subtracted 0.47 percentage points from growth, while inventories reduced GDP by 0.45 percentage point
  • GDP rose 2.4 percent in 2015 for a second straight year
  • Real after-tax personal income in 2015 climbed 3.5 percent, most since 2006

The Takeaway: The tally of fourth-quarter GDP outlined a dichotomy in the U.S. economy -- companies pinched by a strong dollar and weak overseas sales are cutting back, while consumers, enjoying low prices and more disposable income, are hanging in there. Household spending last year rose 3.1 percent, the most in a decade. Provided that consumers don’t get spooked by financial markets and companies don’t respond to sagging global growth by firing workers, personal spending should hold up and ensure the expansion remains intact. On the corporate side, the result of plunging commodities (oil) costs and weak export markets are visible. The GDP report showed nonresidential investment in equipment and structures dropped the most since 3Q 2012. Outlays for structures fell in three of the last four quarters, reflecting a retrenching oil industry. Spending on mines, shafts and wells dropped at a 38.7 percent annualized pace in 4Q and plunged 35 percent in 2015, the most since 1986.


  • Fell to 92 (preliminary 93.3) from 92.6 in December
  • Current conditions dropped to 106.4 (preliminary 105.1) from 108.1
  • Consumer expectations unchanged at 82.7 (preliminary 85.7)

The Takeaway: The downturn in stocks made consumers a bit more concerned in the second half of the month, and it filtered through into less sanguine views about the economy and labor market. Weaker confidence that translates into more subdued spending would make it harder for growth to accelerate after a 4Q slowdown. Respondents in the survey showed more angst about wages and employment prospects. While the GDP report showed the most favorable income growth since 2006, the flashing yellow light in the Michigan survey was consumers’ income expectations, which were the weakest since August 2014.


  • Rose 0.6 percent for a second straight quarter
  • Wages and salaries also climbed 0.6 percent for a second quarter
  • Pay of all employees advanced 2.1 percent from 4Q 2014
  • Benefit costs increased 0.7 percent

The Takeaway: The meager advance shows businesses are keeping a lid on staffing expenses. Even as the labor market wrapped up the best back-to-back years for hiring since 1998-99, and amid greater demand for skilled employees, the long-awaited pickup in wage growth remains elusive in this expansion. Federal Reserve policy makers are waiting for bigger gains in worker pay to help inflation move toward their 2 percent goal.