The final Q4 GDP revision ended up showing 2.9% growth which was up 0.4% from the prior revision. The consumer was at the heart of the growth as consumer spending grew 4% which was up from the prior report which showed 3.8% growth. The non-durable spending growth was increased from 4.3% to 4.8%. The durable spending was revised down from 13.8% to 13.7%. This huge growth came from the rebuilding efforts after the hurricanes. There was a big boost in spending on autos which needed to be replaced after they were destroyed from the flooding.

Total vehicle sales went from 16.4 million in August to 18.9 million in September. You can see the sales were pushed forward after the hurricanes because the sales were 17.4 million in February. It appeared the auto sales were peaking before the hurricane. At best, sales are at a plateau. The overall GDP growth was stronger than the 2.9% headline implies because the results were hindered by the trade balance and weakness in inventory growth. Without those factors, GDP growth would have been 4.5%. There was certainly a post-hurricane bounce, but no, destruction doesn’t help the economy.

Q1 Estimates Are Falling

On the bright side, Q1 will be helped by the tax cuts, but on the other hand it will deal with the hang over effect that comes from the demand pulled from it into Q4. The tax cuts and the expectation that temporary growth in Q4 would continue might have caused the quarter’s estimates to be overzealous to start the year. The worst change on Wall Street is when estimates are revised down. That’s why firms try to under promise and over deliver. The blue chip estimate for Q1 growth has fallen from 2.7% in early February to 2.2% as of mid-March. It appears January was a decent month for the economy, but February saw some weakness.

Explanation Of The Atlanta Fed Model

The Atlanta Fed’s GDP Now estimate is often misinterpreted, so we’ll give a brief explanation before we get into the details of what it means for the economy. The GDP Now is a model which is more accurate as more data comes in. The model is virtually useless at the beginning of the quarter because there’s sparse economic data which is mostly surveys. The survey data always comes out before the hard reports.