GDP Holds Steady at 3.1%
The Bureau of Economic Analysis said its second (revised) estimate of first quarter gross domestic product showed economic growth moderating at 3.1 percent.
The first (advance) estimate last month showed growth at 3.2 percent. In the fourth quarter, real GDP increased by 2.2 percent. The second estimate reflects downward revisions to nonresidential fixed investment and private inventory investment and upward revisions to exports and personal consumption expenditures. Imports, which are a subtraction in the calculation of GDP, were revised up; the general picture of economic growth remained the same.
The report said real gross domestic income increased by 1.4 percent in the first quarter, compared to an increase of 0.5 percent (revised) in the fourth quarter. The average of real GDP and real GDI, a supplemental measure of U.S. economic activity that equally weights GDP and GDI, increased by 2.2 percent in the first quarter, compared to an increase of 1.3 percent in the fourth quarter.
BEA said the increase in real GDP in the first quarter reflected positive contributions from PCE, private inventory investment, exports, state and local government spending and nonresidential fixed investment, partly offset by a negative contribution from residential fixed investment. Imports, a subtraction in the calculation of GDP, decreased. Acceleration in real GDP 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 turned down.
Tim Quinlan, senior economist with Wells Fargo Securities, Charlotte, N.C., said the slight softening was due mostly to a more tepid pace of intellectual property spending and an outright decline in equipment outlays, noting equipment spending went from a scant 0.2% gain in the first estimate to an “outright decline” of 1.0% in the revision. He also noted residential construction continued its trend decline, with the initially reported 2.8% rate of decline revised to a 3.5% drop.
“Without the boost from inventories, GDP growth in Q1 would have only been 2.5%. Yet, there is no sign that the stockpiling is over,” Quinlan said.
BEA also reported profits from current production (corporate profits with inventory valuation and capital consumption adjustments) decreased $65.4 billion in the first quarter, compared to a decrease of $9.7 billion in the fourth quarter. Profits of domestic financial corporations increased $by 7.4 billion in the first quarter, from a decrease of $25.2 billion in the fourth quarter. Profits of domestic nonfinancial corporations decreased by $62.1 billion, compared to an increase of $13.6 billion.
