First Quarter GDP Growth at 3.2%

U.S. gross domestic product increased at a 3.2 percent rate in the first quarter, the Bureau of Economic Analysis reported Friday.

The BEA advance estimate, based on preliminary and incomplete source data, showed an improvement from the final fourth quarter GDP estimate of 2.2 percent. Second (revised) and third (final) estimates will be released in May and June.

The report said the increase in real GDP in the first quarter reflected positive contributions from personal consumption expenditures, private inventory investment, exports, state and local government spending and nonresidential fixed investment. Imports, which are a subtraction in the calculation of GDP, decreased. These contributions were partly offset by a decrease in residential investment.

BEA said acceleration in real GDP growth in the first quarter reflected an upturn in state and local government spending, accelerations in private inventory investment and in exports and a smaller decrease in residential investment, partly offset by decelerations in PCE and nonresidential fixed investment, and a downturn in federal government spending. Imports, which are a subtraction in the calculation of GDP, turned down.

Mike Fratantoni, MBA Senior Vice President and Chief Economist, noted the economy grew “much faster” than anticipated.

“Although this advance estimate is subject to revision, if it holds up, this faster growth should continue to provide strong support for the job and housing markets,” Fratantoni said. “Growth was driven in the first quarter by an increase in inventories and a strong reading on net exports, two factors which could be reversed in the second quarter. Household spending growth actually slowed a bit in the first quarter, which is a bit contrary to recent strong readings on retail sales. Overall, a solid start of the year for the economy.”

Jay Bryson, Global Economist with Wells Fargo Securities, Charlotte, N.C., noted GDP growth was not quite as strong as the headline suggests. “Inventories and net exports made sizeable contributions to overall GDP growth in Q1,” he said. “With price pressures muted, the Fed probably won’t be raising rates anytime soon, stronger-than-expected growth notwithstanding.”