GDP 4Q12

The 4Q12 GDP report is a shocker, falling 0.1% on the quarter. However, the underlying data is not nearly as bad as it looks. The two categories of activity which need to be stronger were. Personal consumption rose 2.2% on the quarter, a better pace than the 1.6% in 3Q. Private investment was buoyed by a strong quarter of business investment in equipment and software which rose 12%. This was much better-than-expected given the various uncertainties during the final quarter of the year. And the categories which were expected to fall back did, only they fell back even more-than-expected. There was a 15% decline in Federal spending which helped to drag 1.3% from the final GDP number via overall government spending. Private inventories also dropped sharply pulling another 1.3% from the GDP total.