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Economy in Brief

U.S. GDP Grows 0.5% in Q1'16
by Tom Moeller  April 28, 2016

Growth in the U.S. economy was barely positive last quarter. Real GDP improved 0.5% (SAAR, 1.9% y/y), the weakest rise since a decline in Q1'14. The advance was held back by weaker consumer spending growth, a decline in business investment as well as heightened subtractions from foreign trade & inventories. The increase compared to expectations for a 0.7% rise in the Action Economics Forecast Survey. The GDP price index increased at a 0.7% rate (1.3% y/y), its slowest rise in a year.

Consumer spending growth of 1.9% last quarter was its weakest since Q1'15. Growth was held back by a 12.4% decline (-1.7% y/y) in motor vehicle & parts purchases as well as a 2.2% drop (+1.4% y/y) in apparel buying. To the upside was spending on recreational goods & vehicles, which rose 8.5% (10.1% y/y). Spending on home furnishings & appliances increased 4.4% (5.8% y/y) and gasoline buying rose 3.7% (1.4% y/y). In the services area, spending growth remained steady at 2.7% (2.6% y/y). It reflected a fairly constant 6.2% advance (6.0% y/y) in transportation, but a diminished 1.1% gain (3.6% y/y) in restaurant & accommodations. Spending on housing & utilities grew 2.2% (0.2% y/y).

Business spending declined at a 5.9% rate, its second consecutive fall, held back by declining corporate profitability. Investment in structures fell 10.6% (-4.4% y/y). Equipment investment fell 8.6% (-0.3% y/y) while intellectual property product buying gained 1.7% (+2.2% y/y). Continuing to be strong was residential investment which grew 14.9% (10.6% y/y).

Spending by governments grew at a 1.2% rate. Federal spending declined 1.6% (+0.2% y/y), held back by a 3.6% decline (-0.5% y/y) in defense buying. State & local government purchases grew at an accelerated 2.9% rate (2.2% y/y).

Deterioration in the foreign trade accounts subtracted 0.3% percentage points from overall economic growth, the largest subtraction in a year. Exports declined 2.6% (+0.3% y/y), its second consecutive fall. Imports inched 0.2% higher (1.2% y/y), powered by a 3.7% rise (3.5% y/y) in services, with more U.S. citizens traveling abroad. Inventory decumulation subtracted 0.4 percentage points from GDP growth, the third consecutive subtraction.

Pricing behavior was constrained by economic weakness. The GDP price index growth of 0.7% reflected a stable 0.3% rise in the personal spending price index. Nondurable goods prices fell 5.6% (-1.2% y/y) with the decline in gasoline prices. Durable goods prices fell 1.1% (-1.3% y/y), but services prices rose an improved 2.4% (2.1% y/y). The nonresidential investment price index increased 0.2% both q/q and y/y. Residential investment prices gained 1.9% (1.4% y/y) while government sector prices were little changed (0.6% y/y).

The GDP figures can be found in Haver's USECON and USNA database. USNA contains virtually all of the Bureau of Economic Analysis' detail in the national accounts, including the integrated economic accounts and the recently added GDP data for U.S. Territories. The Action Economics consensus estimates can be found in AS1REPNA.

Chained 2009 $ (%, AR) Q1'16 (Advance Estimate) Q4'15 Q3'15 Q1'16 Y/Y 2015 2014 2013
Gross Domestic Product 0.5 1.4 2.0 1.9 2.4 2.4 1.5
  Inventory Effect -0.4 -0.2 -0.7 -0.4 0.2 0.0 0.1
Final Sales 0.9 1.6 2.7 2.3 2.3 2.4 1.4
  Foreign Trade Effect -0.3 -0.1 -0.3 -0.1 -0.6 -0.1 0.2
Domestic Final Sales 1.2 1.7 2.9 2.4 2.8 2.8 1.2
Demand Components
Personal Consumption Expenditures 1.9 2.4 3.0 2.7 3.1 2.7 1.7
Business Fixed Investment -5.9 -2.1 2.6 -0.4 2.9 6.2 3.0
Residential Investment 14.9 10.1 8.2 10.6 8.9 1.8 9.5
Government Spending 1.2 0.1 1.8 1.4 0.7 -0.6 -2.9
Chain-Type Price Index
GDP      0.7 0.9 1.3 1.3 1.0 1.6 1.6
Personal Consumption Expenditures 0.3 0.3 1.3 1.0 0.3 1.4 1.4
 Less Food/Energy 2.1 1.3 1.4 1.7 1.3 1.5 1.5
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