The first release of Q4 2015 GDP came in at +0.7% QoQ SAAR, versus +0.8% QoQ SAAR expected. The miss was a combination of slower consumer spending, weak fixed investment, inventory headwinds, and a very weak state and local government spending figure.  Overall, consumers had the strongest spending year (+3.1% YoY in real terms) in 2015 since 2004, and while inventories are still very high, companies are liquidating them without slashing production, an ultimately healthy process. Trade remains a headwind thanks to weak global demand and a strong dollar, but less imports (thanks to high inventories) are helpful in that respect.  Fixed investment faced a big headwind from Transportation-related spending, which knocked 25 bps off of total growth for the quarter;  more importantly, oil patch investment (proxied by fixed investment in mining exploration, shafts and wells) cut 21 bps off growth.  But the share of real GDP going to this category is now down to 41 bps, its lowest level since at least 1999 and 26 bps below the 1999-2014 average.  While we expect disinvestment to continue, there are real limits as to how much more of a headwind it can be for GDP.

One last note: American workers are claiming a rising share of GDP, and that process appears to be accelerating.  As we show in the chart below, both wages and wages + benefits are making new highs for the cycle as a share of nominal gross domestic products, suggesting higher labor bargaining power and building wage pressure.  If these ratios to keep rising over time from all-time lows, it will serve as a major headwind for aggregate corporate profitability.

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