Email from JEC:

Joint Economic Committee
Robert F. Bennett, Vice Chairman
GDP Growth Rate Slows to 1.1% in the Fourth Quarter of 2005
The Bureau of Economic Analysis released an advanced, estimated measure of inflation-adjusted (“real”) gross domestic product (GDP) for the fourth quarter of 2005. The complete text of the release can be found at http://www.bea.doc.gov/bea/dn/home/gdp.htm. In the 3rd quarter of 2005, real GDP grew at a 4.1% annualized rate. Fourth quarter growth was substantially lower than the consensus expectation of 3.0% due largely to an unforeseen drop in government defense spending. The BEA also emphasized that the advanced estimate was based on data that is either incomplete or is subject to further revision. Many analysts expect fourth quarter GDP to be revised upward in the preliminary release scheduled on February 28, 2006.
Highlights:
Ø The major contributors to GDP growth in the 4th quarter were private inventory investment (contributing 1.45%), personal consumption expenditures (PCE) (contributing .79%), equipment and software (contributing .28%), exports (contributing .25%), and residential fixed investment (contributing .21%).
Ø These contributions were offset by an unexpected 7.0 percent drop in government spending (lead largely by decreased defense spending) following a 7.4 percent increase the previous quarter and an increase of 9.1 percent in imports after an increase of just 2.4 percent in the third quarter. Imports are a subtraction from GDP.
Ø The slowdown in GDP was also caused by a decrease in consumer spending due, for the large part, to decreased auto sales.
Ø Year-over-year inflation in the personal consumption expenditure price index excluding food and energy, the Fed’s preferred measure of consumer price inflation, rose by 2.9 percent in the third quarter of 2005, up from 2.5 percent in the previous three months. Including the more volatile energy and food sectors the PCE index increased by 3.3 percent, up from 4.2 percent in the previous quarter.
Ø The personal saving rate rose from -1.8 percent in the third quarter to -0.4 percent in the fourth. The personal savings rate is a calculated as a percentage of disposable personal income.
Ø Real disposable income increased 7.0 percent in the fourth quarter after a decrease of 2.0 percent in the third quarter.