The government’s two main measures of U.S. economic activity posted strong advances at the end of last year, pointing to an economy that’s still expanding at a healthy clip.
Gross domestic product rose at an upwardly revised 3.4% annualized pace in the fourth quarter on the back of stronger household demand and business investment, according to the third estimate of the figures from the Bureau of Economic Analysis out Thursday.
The government’s other main gauge of economic activity — gross domestic income — rose 4.8%, the most in two years. GDI measures income generated and costs incurred from producing goods and services, whereas GDP measures spending on such goods and services.
In theory the two indicators should be equal, but over the last several quarters an unusually large gap had opened up between them, with GDP increasingly outrunning GDI. The discrepancy raised questions about the underlying pace of economic expansion.
The group responsible for officially dating recessions at the National Bureau of Economic Research uses the average between GDP and GDI in determining turning points in the business cycle. The average increase in the fourth quarter was 4.1%, the most in two years.