U.S. GDP Growth Disappoints in Q1’23

Real GDP grew 1.1% at an annual rate (1.6% y/y) during Q1'23 following a 2.6% Q4 rise. It was the weakest rise since negative growth during Q2’22. The latest figure compared to expectations for a 2.1% gain in the Action Economics Forecast Survey.

A reduction of inventories subtracted 2.26 percentage points from GDP growth last quarter following a 1.47 percentage point addition in Q4. Improvement in the foreign trade deficit added 0.11 percentage point to growth after adding 0.42 percentage point in Q4. The gain occurred as exports rose 4.8% (7.1% y/y) after falling 3.7% in Q4. Imports rose 2.9% in Q1 (-2.0% y/y) following declines during the prior two quarters.

Growth in domestic final demand strengthened to 3.2% (1.4% y/y) following a 0.7% Q4 rise. Real personal consumption expenditures strengthened 3.7% (2.3% y/y) following 1.0% growth in Q4. Durable goods outlays surged 16.9% (2.7% y/y). Spending on motor vehicles & parts strengthened 45.3% (4.4% y/y), and furniture & appliance outlays rose 2.6% (1.0% y/y). Recreational goods & vehicle buying improved 6.7% (3.5% y/y). In the nondurable goods sector, spending rose 0.9% (-0.3% y/y). Outlays on food & beverages eased 0.3% (-3.4% y/y) following declines in three of the prior four quarters. Clothing outlays fell 2.0% (+2.1% y/y) while gasoline & oil expenditures rose 2.6% (-0.3% y/y). Purchases of services improved 2.3% (3.0% y/y) after a 1.6% rise. Housing & utilities outlays weakened 0.9% (+0.5% y/y) and health care outlays increased 5.7% (4.6% y/y). Spending on recreation increased 5.9% (5.8% y/y) while spending at restaurants & hotels rose 4.8% (6.9% y/y).

Business fixed investment edged 0.7% higher (2.7% y/y) in Q1’23 after strengthening 4.0% in Q4 . Structures investment rose 11.2% (2.0% y/y) but had been falling since 2019. Equipment investment fell 7.3% (-0.8% y/y), reflecting a 1.7% decline (-6.5% y/y) in information processing equipment and a 0.9% easing (-3.3% y/y) in industrial equipment outlays. Transportation equipment investment plummeted 18.3% (+22.7% y/y) while investment in intellectual property products rose 3.8% (6.4% y/y), remaining strong since the end of the 2020 recession.

Residential investment declined for the eighth consecutive quarter, weakening 4.2% (-19.0% y/y) in Q1.

Government spending increased 4.7% (2.6% y/y) in Q1’23, the third consecutive quarter of firm growth. Federal government spending surged 7.8% (3.4% y/y) as defense spending rose 5.9% (3.6% y/y). Nondefense outlays surged 10.3% (3.2% y/y) following a similar increase in Q4. State & local government spending rose 2.9% (2.2% y/y), about as it has for three straight quarters.

The GDP chain price index increased 4.0% (5.3% y/y) last quarter, roughly the weakest increase since the end of 2020. It was down from a high of 9.0% in Q2’22. The Action Economics Forecast Survey expected a 3.8% increase. The PCE chain price index rose 4.2% (4.9% y/y), after increasing 3.7% in Q4. The PCE price index less food & energy gained 4.9% (4.7% y/y). The nonresidential investment price index rose 7.0% (6.6% y/y). The structures price index increased 7.3% (13.0% y/y) and the equipment price index improved 7.7% (7.2% y/y). The intellectual property products price index improved 6.1% (3.2% y/y). The residential investment price index declined 1.9% (+6.5% y/y) after a peak 18.9% rise in Q1’22. The government spending price index rose 1.6% (5.0% y/y).

The GDP figures can be found in Haver's USECON and USNA databases. USNA contains virtually all of the Bureau of Economic Analysis' detail in the national accounts. Both databases include tables of the newly published not seasonally adjusted data. The Action Economics consensus estimates can be found in AS1REPNA.