1Michael Feroli (1-212) 834-5523michael.e.feroli@jpmorgan.comJPMorgan Chase Bank NADaniel Silver (1-212) 622-6039daniel.a.silver@jpmorgan.comMurat Tasci (1-212) 622-0288murat.tasci@jpmchase.comNorth America Economic ResearchGlobal Data Watch26 January 2024J P M O R G A NStill going strongThe marquee report of the week was the first look at 4Q GDP growth. The 3.3% outturn was an upside surprise, driven mostly by a larger-than-anticipated inventory build. Strong inventories last quarter could detract from growth this quar-ter: with flusher stockpiles at the end of 4Q firms may see less need to ramp up production to meet demand this quarter. Even so, away from inventories it was a solid report. Private domestic demand, sometimes considered a sort of “core GDP� measure, grew at a respectable 2.6% rate (Figure 1). subtitleFigure x: Title-5051015202120222023%ch, saarFigure 1: Real GDP and private domestic demandSource: BEA, J.P. MorganPrivate domesticdemandGDPThe largest piece of private domestic demand, and of GDP overall, is consumer spending, which grew at a firmer-then-expected 2.8% rate in 4Q. Spending accelerated into the end of the quarter, with a chunky 0.5% gain in December real out-lays. Spending on durables was supported by purchases of vehicles and recreational goods (Figure 2). -10-505101520Jan 23Apr 23Jul 23Oct 23Jan 24% ch, 3m saarFigure 2: Growth of real personal expendituresSource: BEA, J.P. MorganNon-durable goodsServicesDurablegoods The other major component of private domestic demand—business fixed investment spending—trudged forward at a 1.9% rate. Within capex there have been some notable devel-opments (Figure 3). •Real GDP grew at a 3.3% rate last quarter and we now look for a 1.75% gain this quarter•Core PCE inflation increased at only a 2.0% rate last quarter and 2.9% in the year ending December•While welcoming the inflation progress, we expect the FOMC to be cautious in signaling cuts•We expect nonfarm employment growth of 225,000 in January, on fewer layoffs than usualIn the second half of last year the US economy achieved the elusive soft landing: core inflation gliding toward 2% with few bumps in the labor market or economic activity. To the contrary, growth was quite firm. This week saw the first report on GDP growth in 4Q23, which came in at a strong 3.3%. For the second half as a whole output growth was an even stronger 4.1%. Meanwhile core PCE inflation last quar-ter increased at only a 2.0% rate—effectively a repeat of the 3Q outcome and spot on the nose of the Fed�s inflation target. After the immaculate disinflation of 2H23 will the favorable configuration of growth and inflation continue in 2024? We won�t get our first real look at developments early in the year until next Friday�s January payroll report. However, consumer spending momentum increased late in 4Q with a solid 0.5% gain in real cons...
