2013 GDP disappoints: fiscal austerity main culprit

The BEA released GDP numbers for 4Q 2013 and therefore for the entirety of the year (with revisions to come in Feb). The growth rate disappointed, showing a slowdown as compared to the year before. The two headline numbers:

"Real gross domestic product -- the output of goods and services produced by labor and property located in the United States -- increased at an annual rate of 3.2 percent in the fourth quarter of 2013 (that is, from the third quarter to the fourth quarter)"

And:

"Real GDP increased 1.9 percent in 2013 (that is, from the 2012 annual level to the 2013 annual level), compared with an increase of 2.8 percent in 2012"

It should be noted, when measured from 4Q 2012 to 4Q 2013, yearly GDP rose a bit more, by 2.7 percent. Below I've collected a number of tweets by experts that I think represent the pessimistic response. Many economists and economics writers didn't like what they saw on the year-to-year number. The most important detail on the downside, as far as I can tell, has to do with the drag exerted by federal government cutbacks — "austerity," US-style. Sequester. Whatever you want to call it.

No matter what the tea party or "grand bargain" adherents say, government contraction is getting in the way of economic recovery, not fostering it. For example, look at this:

"Q4 growth was very different from Q3" http://t.co/kWwowoANd2 pic.twitter.com/r5eI6BpXVa
— Matthew B (@boes_) January 30, 2014

Here's a string of tweets from Ryan Avent, economics correspondent for The Economist:

3.2% GDP growth in Q4 is really good for this recovery, and pretty disappointing by all other standards.
— Ryan Avent (@ryanavent) January 30, 2014

Annual growth of 1.9% in 2013 is lousy. When the US did that in 1990 it was easily the worst year of the 1980s expansion.
— Ryan Avent (@ryanavent) January 30, 2014

From 1992 to 2000, the US never grew less than 2.7% per year.
— Ryan Avent (@ryanavent) January 30, 2014

Arguably, the US fell farther behind the pre-crisis trend in 2013. It's on track to write off $1 trillion in econ potential, permanently.
— Ryan Avent (@ryanavent) January 30, 2014

But yeah, apart from that Q4 was pretty smokin.
— Ryan Avent (@ryanavent) January 30, 2014

Here's another negative look, from Mike Konczal:

Again, recovery rate slowed rather than sped up in 2013. You would have rather had another 2012 instead. What an unforced, human disaster.
— Mike Konczal (@rortybomb) January 30, 2014

But hey, we locked in $4 trillion in deficit reduction over ten years, so the stagnating misery of our economy has that going for it.
— Mike Konczal (@rortybomb) January 30, 2014

And so forth:

Austerity continues. In fourth quarter, declines in federal government spending reduced GDP growth by .98%--huge.
— Daniel Gross (@grossdm) January 30, 2014

And I'll finish with some optimism:

It'll be nice to get the fiscal austerity monkey off the back of the economy in 2014. It knocked 0.9% off Q4 growth. Growth coulda been 4%!
— Justin Wolfers (@JustinWolfers) January 30, 2014

Finally, writing in the Financial Times, Robin Harding gives the bad & the good.

First the bad:

Despite high profits, business just will not invest Most forecasts for strong growth in 2014 – and all hopes for sustainable growth – rest on a pick-up in business investment. Despite record high corporate profits as a share of gross domestic product, investment has recovered at a much slower pace than after previous recessions. That story continued in the fourth quarter of 2013 with annualised growth in fixed investment a disappointing 0.9 per cent. The composition of that was a little more encouraging – investment in equipment rose at an annualised 6.9 per cent but was dragged down by falling investment in commercial real estate – but the overall picture is still that companies are content to sweat their existing assets rather than invest strongly in future growth.

And then the good:

But the bottom line is: good news The single most useful number in the GDP release is not the top line but a figure called “final sales of domestic product”. It strips out inventory movements to report how much stuff the US economy actually sold to buyers both at home and abroad. Final sales of domestic product accelerated in every quarter of 2013, from 0.2 per cent growth in the first quarter, to 2.1 per cent in the second quarter, 2.5 per cent in the third and then 2.8 per cent growth in the final quarter of the year. That is strong evidence that the underlying performance of the economy picked up through the year and headed into 2014 with strong momentum. Despite the occasional wobble, the long-awaited pick-up in US growth still seems to be coming through.