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The Economy Probably Didn’t Contract in the Fourth Quarter



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Though it probably didn’t grow much, either. A couple weeks ago, the Bureau of Economy Analysis announced that the U.S. economy had shrunk by 0.1 percent in the fourth quarter of 2012, a surprising number — and as usual, this number is coming in for some revision. Updated trade data released yesterday suggest that the U.S. economy did better than that, but disappointing updated inventory data trims that back a bit. From the Japanese investment bank Nomura (via Business Insider):

Data releases today each had a significant impact on our Q4 GDP tracking model, but on net the change was a small positive. We began the day with Q4 GDP tracking a decline of -0.1%, matching the BEA’s advanced estimate. Better-than-expected December trade data lifted Q4 tracking to 0.6%, but December wholesale inventory data pushed it back down to 0.2%.

The trade deficit narrowed sharply in December, much more so than the BEA’s original assumption in its Q4 GDP estimate. The December trade gap was the narrowest since January 2010. Exports jumped by 2.1% in December while imports dropped by 2.7%. Imports tend to reflect movements in inventories and the large inventory drawdown reported in Q4 suggested that imports had declined.



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