MACRO: US GDP growth rate revised slightly lower, consumption weakens

The final US GDP expanded an annualized 6.9% in the Q4, slightly below market expectations of 7.0% and in line with preliminary reading. Today's publication did not cause volatility in the market, but it is worth noting that we have one certain factor that may affect the stability of strong growth - inventories.

Real GDP is growing at an annualized rate of 6.9%. In nominal terms, taking into account current prices, we have a double-digit increase. Source: BEA

However, the contribution of inventories is over 5%, which means that their growth was responsible for 75% of GDP growth in the fourth quarter of 2021. At the same time, the contribution of private consumption is falling sharply. Usually it remained well above 2%, while in the fourth quarter it fell to 1.76%. Obviously, we have a negative contribution from net exports and a large negative contribution from government consumption.

Inventory contribution amounted to over 5.0% in the last quarter. In the first quarter of 2022 economists expect nearly 3% negative inventories contribution. Source: FRED

Consumption growth in Q4 fell from 3.1% to 2.5% in the latest GDP estimate. Consumer budgets are adversely affected by rising inflation. Expectations for Q1 2022 indicate only an increase of 0.5% at an annualized pace. As one can see, we have several signals that the US may be on the verge of recession, although it is worth noting that the labor market is still holding firm, which may limit the risk of a collapse. However, if labor market conditions worsens, the recent turn of the yield curve could indeed have signaled the approach of a recession.