Economic Snapshot: Advance estimates indicate GDP expanded 2.6 percent in fourth quarter

We are seeing small dips in gross domestic product growth from the last quarter and in ADP employment and ISM manufacturing from December to January, but these numbers are not too shocking as we enter the winter months.

And as we know, we need to really be paying attention to year-over-year comparisons, all of which are looking strong with this week’s reports. Private-sector employment added almost 100,000 more jobs in January than the previous year, and both the manufacturing and non-manufacturing sectors keep consistently growing. There is still plenty to be optimistic about in 2015.


According to the advance estimate released by the Bureau of Economic Analysis, real gross domestic product increased at an annual rate of 2.6 percent in the fourth quarter of 2014. Real GDP increased 5.0 percent in the third quarter.

The increased reflected positive contributions from personal consumption expenditures (PCE), private inventory investment, exports, nonresidential fixed investment, state and local government spending and residential fixed investment. PCE increased at an annualized rate of 4.3 percent.

These contributions were partially offset by a negative contribution from federal government spending.

The price index for gross domestic purchases decreased 0.3 percent, in contrast to the 1.4 percent increase in the fourth quarter. Excluding food and energy prices, the price index increased 0.7 percent, compared with an increase of 1.6 percent last quarter.

ADP employment

Private-sector employment increased by 213,000 from December to January, marking the fifth consecutive month of employment gains above 200,000 and considerably higher than the 121,000 jobs added in January 2014.

Service-providing businesses led the way in employment gains with 183,000 jobs. Professional/business services contributed 42,000 jobs, significantly lower than 72,000 in December. However, jobs in trade/transportation/utilities increased sharply to 54,000 from 40,000. Jobs in financial activities dropped to 11,000 from 14,000, but are still well above the average in the past twelve months.

Good-providing services added 31,000 jobs in January.

Midsized businesses, with 50 to 499 employees, added the highest number of jobs in January at 95,000. Small businesses were not far behind at 78,000 and large businesses added 40,000 jobs.

ISM manufacturing

The ISM manufacturing index decreased 1.6 percentage points to 53.5 percent, down from 55.1 in December. However, this marks the 20th consecutive month of economic activity expansion in the manufacturing sector and the 68th consecutive month of overall economic growth.

New orders decreased 4.9 percentage points to 52.9 in January while production decreased 1.2 percentage points to 57.7. Employment also saw a decrease of 1.9 percentage points to 54.1 and prices decreased 3.5 percentage points to 35.0, which indicates lower raw materials pries in January relative to December.

Fourteen of the 18 manufacturing industries are reporting growth in January. Only two industries are reporting contraction: Textile Mills and Nonmetallic Mineral Products.

ISM non-manufacturing

The ISM non-manufacturing index increased 0.2 percentage points to 56.7 in January, marking the 60th consecutive month of economic activity growth in the sector.

Business activity increased 2.9 percentage points to 61.5 percent, reflecting 66 months of growth at a faster rate. New orders registered at 59.5, 0.3 percentage points higher than December/

Employment decreased 4.1 percentage points to 51.6 in January but marks the 11th month of consecutive growth. Prices decreased 4.3 percentage points to 49.8, indicating prices contracted from December to January.

Eight non-manufacturing industries are reporting growth this month, equal to the number of industries reporting contraction.

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