I’ve read some interesting articles on Friday’s Q4 final GDP revision. Steven Hansen’s 4Q2010 GDP Revised Back Up gives a nice annotated look at the past five quarters with a close-up look at the three estimates for Q4 2010. Rick Davis in Fourth Quarter GDP Growth Could Vanish speculates on what GDP would look like if the real GDP inflation adjustment were based on the Consumer Price Index instead of the GDP deflator. His title gives a strong hint of his findings.
The chart below is my attempt to visualize real GDP change since 2007. I’ve used a stacked column chart to segment the four major components of GDP with a dashed line overlay to show the sum of the four, which is real GDP itself.
As we can see, gross private domestic investment went negative several months before the Great Recession. The recession call itself by the National Bureau of Economic Research (NBER) was approximately coincident with personal consumption expenditures going negative in Q1 2008 and returning to positive territory in Q3 2009.
Gross private domestic investment again went negative in Q4 2010. Let’s hope that’s not a leading indicator for the direction of overall GDP as it was in the second half of 2007.
Note: My data source for this chart is the Excel file accompanying the BEA’s latest GDP news release (see the links in the right column). Specifically, I used Table 2: Contributions to Percent Change in Real Gross Domestic Product.