–Still Has Better Consptn, Less Inv; Corp Profits +$16.8B Current Prodn

By Joseph Plocek

WASHINGTON (MNI) – The final U.S. Q4 GDP report disappointed those
looking for a massive boost from medical services, printing +3.0% for
overall real growth, marking the same pace as in the previous estimate.

In Q3 there was a 0.7 point difference between the first and final
Q3 real GDP estimates, but in Q4 this difference was back to a more
normal 0.2 point on offsetting errors.

GDP data still show the economy accelerating into year-end but with
slowing final sales. The latter indicates modest growth ahead.

The Q4 GDP revisions included lower exports from source trade data
and upward-revised equipment & software investment. The latter was
mainly from more software spending reflected in the new quarterly
services survey.

Overall Personal Consumption Expenditures were unchanged from the
prior report at +2.1% as durable goods purchases jumped 16.1% with
rising spending on motor vehicle and furnishings. Nondurables printed
+0.8% in a turnaround from a Q3 dip, mainly on more spending on
clothing in the holiday shopping season.

PCE services printed +0.4% compared to +0.7% in the prior estimate.
Healthcare spending was revised up but transportation, financial and
recreation were revised down in offsets. Private analysts had
extrapolated a surge in hospital services in a new Census Bureau survey
into a larger gain in services overall, causing some to hike their GDP
estimates substantially.

While overall healthcare spending represents about 11% of GDP, a
breakdown by the Centers for Medicare Studies shows that in-hospital
services represent only about a third of this spending, for about 3% of
GDP. The balance is in drugs, physicians’ visits, and home-care. Hence
the impact of the hospital category probably was never likely to have
the advertised outsized impact.

New information in this report on corporate profits shows a +$16.8
billion gain in the current production measure. But profits were down
-$8.3 billion before taxes, compared to +$22.3 billion in Q3. Domestic
nonfinancial profits were higher except for the oil industry, while
receipts from overseas fell.

Price data were tame. Core PCE prices printed +1.3% in Q4. The
overall GDP price index was just +0.9%. Rising gasoline prices ahead may
boost inflation measures.

For all 2011, GDP remained at +1.7% after printing +3.0% in 2010.

As Q1:2012 comes to a close, rising consumption again will boost
GDP. The February PCE report, due Friday, will help gauge the magnitude
of the gain.

GDP Components: Q1 Q2 Q3 Q4 intl Q4 rev Q4 finl
Real growth +0.4% +1.3% +1.8% +2.8% +3.0% +3.0%
Real final sales +0.0 +1.6 +3.2 +0.8 +1.1 +1.1
PCE +2.1 +0.7 +1.7 +2.0 +2.1 +2.1
Nonres fixed invest +2.1 +10.3 +15.7 +1.7 +2.8 +5.2
Res fixed invest +2.4 +4.2 +1.3 +10.9 +11.5 +11.6
Net Exprt Contrib cut 0.34 add 0.24 add 0.43 cut 0.11 cut 0.07 cut 0.26
Inventory Contrib add 0.32 cut 0.28 cut 1.35 add 1.94 add 1.88 add 1.81

**Market News International Washington Bureau: (202)371-2121**

[TOPICS: M$U$$$,MU$$$$,M$$FI$,MT$$$$,MAUDS$]