Economic data tells half-truth

The Boeing 787-10 Dreamliner sits on the tarmac before a delivery ceremony to Singapore Airlines at the Boeing South Carolina Plant in North Charleston, South Carolina, United States March 25, 2018.
The Boeing 787-10 Dreamliner sits on the tarmac before a delivery ceremony to Singapore Airlines at the Boeing South Carolina Plant in North Charleston, South Carolina, United States March 25, 2018. REUTERS/Randall Hill/File Photo

WASHINGTON, Jan 26 (Reuters Breakingviews) - The best measure for tracking how much value an entire economy puts out, arguably, is gross domestic product. But for those trying to parse through Thursday’s U.S. GDP reading, published by the Bureau of Economic Analysis, the devil is in the details. And a devil it is.

The country’s GDP grew more in the fourth quarter than economists forecasted. That’s pretty good. And as a backup, orders of durable goods like appliances, vehicles, and furniture also surpassed expectations. In theory, that suggests real, underlying strength.

The trouble is that economic growth was largely fueled by companies, not people, which reflects the real heartbeat of the economy. Large U.S. businesses increased spending to bolster inventories. But that’s volatile. Strip out that and other inconsistent segments, and the U.S. economy grew at just a 0.2% annualized pace in the fourth quarter, the smallest jump since early 2020.

Spending on durable goods was also skewed. Orders climbed 5.6% in December, according to the Commerce Department, but most of the jump had to do with a huge order from Boeing (BA.N). Take planes and cars out of the equation, and orders fell 0.1%. It’s a harsh reality, but ignoring the devil comes with perils, too. (By Ben Winck)

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(The author is a Reuters Breakingviews columnist. The opinions expressed are their own.)

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