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Viewpoints
Commentaries are the opinions of the author and do not reflect the views of Haver Analytics.
by Tom Moeller April 28, 2005
US real GDP growth of 3.1% (AR) in 1Q05 was the slowest in two years and fell short of Consensus expectations for a 3.5% advance. Also a surprise was the 3.3% rise in the GDP Chain Price Index. This strongest gain in four years easily surpassed estimates for a 2.1% increase.
The drag on US output from a deepened foreign trade deficit increased to 1.5 percentage points due to an acceleration in real import growth to 14.7% (10.8% y/y). Growth in auto imports accelerated to 13.7% (5.5% y/y) and nonauto consumer goods imports held steady at 27.8% (15.4% y/y). Capital goods imports slipped to 4.9% (14.3% y/y) and growth in exports more than doubled to 7.0% (5.9% y/y).
The acceleration in the chain price index was due to inventories and a faster 2.2% (1.6% y/y) gain in consumer prices less food & energy. In addition, after two quarters of deflation prices for business equipment & software rose 0.6% (-0.5% y/y). Overall, the price index for domestic demand held about steady at 3.0% but the y/y gain of 2.8% is up from 1.7% a year ago.
Domestic demand growth suffered mostly from slower business investment growth which fell to 4.6% (11.1% y/y) from 14.5% in 4Q. Growth in business fixed investment in computers & software picked up to an even headier 24.3% (15.7% y/y) but spending levels elsewhere fell. Consumer spending growth slipped to 3.5% (3.6% y/y). Less computers real GDP grew 2.5% (3.3% y/y) versus 4.3% growth during 2004.
Faster inventory accumulation contributed the most to output growth in a year. The 1.2% add reflected a change in real private nonfarm inventories of $82.5B which was the fastest since early 2000 and nearly double the 4Q04 rate.
A Big League Economy Tunes Up in Spring Training from the Federal Reserve Bank of Dallas is available here.
Chained 2000$, % AR | 1Q '05 (Advance) | 4Q '04 (Final) | Y/Y | 2004 | 2003 | 2002 |
---|---|---|---|---|---|---|
GDP | 3.1% | 3.8% | 3.6% | 4.4% | 3.0% | 1.9% |
Inventory Effect | 1.2% | 0.5% | 0.4% | 0.4% | -0.1% | 0.4% |
Final Sales | 1.9% | 3.4% | 3.2% | 4.0% | 3.1% | 1.4% |
Trade Effect | -1.5% | -1.4% | -0.8% | -0.4% | -0.3% | -0.7% |
Domestic Final Demand | 3.2% | 4.5% | 4.0% | 4.4% | 3.4% | 2.1% |
Chained GDP Price Index | 3.3% | 2.3% | 2.5% | 2.2% | 1.8% | 1.7% |