The US GDP Advance Estimate for the fourth quarter and year 2022 has been released. In this article, we will analyze the data provided by the Bureau of Economic Analysis (BEA) and review the US GDP Advance Estimate: Fourth Quarter and Full-Year 2022.
US GDP Advance Estimate: Fourth Quarter and Full-Year 2022
The Bureau of Economic Analysis (BEA), on Wednesday (i.e. 26th January, 2023, released Advance Gross Domestic Product (GDP) Estimates for the Fourth Quarter and Year 2022.
According to the press/news release of ‘Advance’ Estimates the Real GDP increased at an annual rate of 2.9% in the fourth quarter of 2022. The third quarter real GDP increased at 3.2%.
It also stated that the GDP estimates are incomplete or subject to further revision (i.e. change) by the source agency.
Contribution to Real GDP – Fourth Quarter, 2022
Increases in consumer spending, federal government spending, state and local government spending, private inventory investment, and non-residential fixed investments are all reflects the increase in real GDP. There is a decrease in residential fixed investment and exports. While calculating the GDP, imports are subtracted (i.e. minus)
Consumer Spending:
Spending increased in both services and goods this attributed to increase in consumer spending. In Services, there is an increase in health care, housing and utilities and other services (particularly personal care services). In goods, motor vehicles and parts was the leading contributor.
Government Spending (including state and local government)
The nondefense spending has increased and it is major contributor for increase in federal government spending. Increase in compensation of state and local government employees are reflected in the increase in state and local government spending.
Private Inventory Investment
The Manufacturing and Mining, Utilities & Construction led to increase in Private Inventory Investment. In Manufacturing, the major contributor is petroleum and coal products along with chemicals. In Mining, Utilities & Construction, the utilities is the major contributor.
Non-residential Fixed Investment
An increase in intellectual property products was partially compensated by a decrease in equipment in Non-residential fixed investment.
Residential Fixed Investment
The decrease in Residential Fixed Investment is due to new single-family construction and brokers’ commissions.
Exports
The decrease in exports is due to decrease in goods, mainly nondurable goods except petroleum. This was compensated by an increase in services particularly from travel as well as transport.
Imports
The decrease in goods, especially durable consumer goods, is the reason for decrease in imports.
Fourth Quarter Comparison with Third Quarter, 2022
There is a decline (or deceleration) in fourth quarter real GDP compared to third quarter. This decline is primarily reflected in decrease in exports and decelerations in non-residential investment, state and local government spending, and consumer spending.
These are partially compensated by an increase in private inventory investment, increase in federal government spending, and a marginal decrease in residential fixed investment. Imports are reduced less in fourth quarter while compared to the third quarter.
Current-Dollar GDP in Fourth and third Quarter
In terms of Current-dollar GDP, it has increased by 6.5% at an annual rate. In terms of value, current dollar GDP is increased to $408.6 billion, in the fourth quarter to a level of $26.13 trillion. In the third quarter, the GDP increased by 7.7%, in value terms $475.4 billion.
Compared to an increase of 4.8% in the third quarter, the Price index for GDP purchases has increased by 3.2% in fourth quarter. The PCE index increased by 3.2% in fourth quarter compared to 4.3% in previous quarter. The Core PCE price index (i.e. excluding food and energy prices) has increased 3.9% compared to an increase of 4.7% in third quarter.
Personal Income
In the fourth quarter, the Personal Income has increased $311.10 billion, compared to an increase of $283.1 billion in the third quarter. The increase is mainly echoed to an increase in compensation – led by private wages and salaries – government social benefits and personal interest income. The increase in other benefits mirroring state stimulus payments to individuals in the form of one-time refundable tax credits, is the major contributor within government social benefits.
Disposable Personal income is increased by 6.5% in fourth quarter compared to 5.4% in the previous quarter. In terms of value there is an increase of $297.40 billion in fourth quarter, compared to an increase of $242.4 billion in the third quarter.
Real disposable personal income has increased by 3.3% in the fourth quarter, compared to an increase of 1% in third quarter.
Personal Savings
In terms of value, Personal savings was $552.9 billion in the fourth quarter, compared to $507.7 billion in the third quarter. The personal saving rate (calculated as a percentage of disposable personal income) was 2.9% in the fourth quarter, compared to 2.7% in the previous quarter.
GDP for 2022 – Full Year
For the Annual Year 2022, the Real GDP increased by 2.1% (Year or Year – i.e. from 2021 to 2022) compared to an increase of 5.9% in 2021.
The increase in consumer spending, exports, private inventory investment, and non-residential fixed investment are reflected and are the major contributor for increase in Real GDP. This was partially compensated by decreases in residential fixed investment and federal government spending. In 2022, the Imports increased.
Consumer Spending
Increase in services is the main contributor which reflects the increase in consumer spending. This is partially offset by decline in goods. In services, the increase was driven by other services, – especially international travel, – food services and accommodation, and health care.
The decline in goods are mainly due to decrease in food and beverages and also motor vehicle & parts. This was balanced by an increase in recreational goods & vehicles and other nondurable goods (particularly pharmaceuticals)
Exports
Exports in both goods and services are increased and the same reflected in overall Exports.
Private Inventory Investment
Primary increase in manufacturing, wholesale trade and retail trade industries are reflected in the increase in private inventory investment.
Non-residential Fixed Investment
Due to increase in intellectual property products, mainly software, and in equipment (mainly by information processing equipment) there was an increase in non-residential fixed investment. This was partially balanced by a decrease in structures – mainly commercial and health care along with power & communication structures.
Residential Fixed Investment
The decrease in Residential Fixed Investment is due to new single-family construction and brokers’ commissions.
Government Spending
Decreases in both defence and nondefense spending are reflected in the decrease in federal government spending.
Imports
Both goods and services imports are increased. In goods, nonautomotive capital goods is the major contributor. In services, the travel is the main contributors.
Comparison of GDP Current dollar, 2022 and 2021
Current-Dollar GDP in 2022 and 2021.
Current-dollar GDP increased 9.2% in 2022, compared to an increase of 10.7% in 2021. In terms of value, current-dollar GDP it is $2.15 trillion in 2022, compared to $2.25 trillion in 2021.
The price index for gross domestic purchases has increased by 6.8% in 2022, compared to an increase of 4.2% percent in 2021.
The PCE price index increased 6.2%, compared to an increase of 4%.
The Core PCE price index (i.e. excluding food and energy prices) increased by 5%, compared to an increase of 3.5%.
Yearly Quarter on Quarter Comparison (i.e. 4th Quarter of 2021 and 4th Quarter of 2022)
The real GDP has increased 1% in fourth quarter of 2022, while measured from the fourth quarter of 2021. While there was an increase of 5.7% in fourth quarter of 2021 measured from the fourth quarter of 2020.
The Quarter on Quarter of the price index for gross domestic purchases, is increased by 6.1% in 2022 (when measured from the fourth quarter of 2021) compared to 5.8% in 2021 (when measured from the fourth quarter of 2020)
The PCE price index increased 5.5% in the fourth quarter of 2022, compared with an increase of 5.7% in the fourth quarter of 2021.
The Core PCE price index (i.e. excluding food and energy index) increased 4.7% in fourth quarter of 2022, it is the same as from the fourth quarter of 2020 to the fourth quarter of 2021.
The following table is modified from the Official Data of BEA. Only Major heads are shown for most of the sectors and minor heads are shown for important sectors
Business Employment Dynamics data by BLS
On 25th January, 2023, the Second Quarter Business Employment Dynamics is released by the U.S. Bureau of Labor Statistics (BLS). According to this data, the gross job gains from opening and expanding private-sector establishments were 8.3 million during March, 2022 to June, 2022 (i.e. Second Quarter). This is a decrease of 185,000 jobs from the previous quarter.
In the Second Quarter, the gross job losses from closing and contracting private-sector establishments were 8.5 million. This is an increase of 1.6 million jobs from the previous quarter. The net employment loss (i.e. gross job gains minus (-) gross job losses) of 287,00 jobs in the private sector during the second quarter of 2022.
Our Perspective
From the Advance Estimates, it is clearly visible that economy is slowing down. However, there are many positive notes which one cannot ignore to notice. Consumer spending and Personal income one of the key drivers or say engine of the US economy has improved in the fourth quarter. This means that economy is showing resilience.
Conclusion
From the Advance Estimates, it is clearly visible that economy is slowing down. However, there are many positive notes which one cannot ignore to notice. Consumer spending and Personal income one of the key drivers or say engine of the US economy has improved in the fourth quarter. This means that economy is showing resilience. The employment data of the second quarter seems to be little worrisome factor, but as it is noted that GDP for the fourth quarter has improved. This must have accompanied by the employment (let us hope so). So, one cannot say clearly that whether economy is improving or not falling into recession.
FAQs
What is the US GDP Advance Estimate for the fourth quarter and year 2022?
The US GDP Advance Estimate for the fourth quarter and year 2022 released by Bureau of Economic Analysis, shows a marginal increase in GDP growth of 2.9% & 2.1%, respectively.
What are the key components of GDP in the fourth quarter?
The key components of GDP during the fourth quarter mostly include Personal Consumption Expenditure, Government Consumption Expenditure & Gross Investment, and Exports. Personal Consumption Expenditure has increased by 2.1% for the fourth quarter, compared to the same period during 2021.
What is the forecast for US GDP growth in the coming years?
As the United States rebuilds from the pandemic’s effects, the economy is anticipate to grow more in the years to come. The US BEA predicts continued positive GDP growth for the United States during the next few years.
What are the key drivers of US GDP growth?
The main key drivers of US GDP growth include consumer spending, investment, government spending, & net exports.