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Economy in Brief

U.S. GDP Growth Improves With Inventory Accumulation but Government Outlays Decline
by Tom Moeller  April 26, 2013

Economic growth rebounded during Q1'13 as businesses replenished inventories depleted during Q4'12. Real GDP growth of 2.5% last quarter (1.8% y/y) followed a tepid 0.4% increase at the end of the year. Expectations were for a 3.1% rise. Holding back final demand were military outlays which declined sharply for the second consecutive quarter. Foreign trade account deterioration also subtracted from growth. To the plus side were consumer spending and residential investment. The GDP chain price index rose moderately (1.2%) for the second consecutive quarter.

While boosting growth last quarter, the effect due to inventories was limited to 1.0 percentage points. Businesses are clearly keeping close tabs on restocking as this did not recoup the 1.5 point subtraction during Q4. Also disappointing was a 0.5 percentage point subtraction from growth due to trade deficit deterioration. It occurred as imports rose at a 5.4% rate (0.8% y/y) but exports gained a lesser 2.9% (1.8% y/y).

Also disappointing was a modest 1.9% rise (1.7% y/y) in final sales to domestic purchasers. Growth was held back by a 4.1% (-2.1% y/y) decline in government purchases. This drop owed to an 11.5% shortfall (-6.1% y/y) in national defense spending which was accompanied by a 1.3% decline (-0.9% y/y) in state & local government outlays. 

Final sales to private domestic purchasers continued firm, posting a 3.3% rise (2.6% y/y) after Q4's 3.6% gain. A firmer 3.2% increase (2.0% y/y) in personal spending was led by a 10.6% advance (7.7% y/y) in motor vehicle purchases. Consumption of home furnishings rose at a 3.5% rate (3.1% y/y) but apparel consumption increased a lesser 1.4% (-0.0% y/y). Continuing strong was residential investment, up at a 12.6% rate (13.0% y/y), but business fixed investment growth eased to 2.1% (4.1% y/y) following a 13.1% rise during Q4.  

The GDP chain price index matched expectations and rose at a modest 1.2% rate (1.6% y/y). That followed a 1.0% Q4 rise. This modest gain was largely influenced by a 0.9% increase (1.2% y/y) in the PCE price index, held back by lower energy prices. A firmer 5.2% rise (3.2% y/y) in the residential price index was countered by a 0.6% uptick (1.0% y/y) in the business fixed investment price index. 

The latest GDP figures can be found in Haver's USECON and USNA databases; USNA contains basically all of the Bureau of Economic Analysis' detail on the national accounts, including the new integrated economics accounts and the recently added GDP data for U.S. Territories. The Consensus estimates can be found in AS1REPNA

Chained 2005 $, %, AR Q1'13 (Advance) Q4'12 Q3'12 Q1 Y/Y 2012 2011 2010
Gross Domestic Product 2.5 0.4 3.1 1.8 2.2 1.8 2.4
 Inventory Effect 1.0 -1.5 0.7 -0.1 0.2 -0.2 1.5
Final Sales 1.5 1.9 2.4 1.9 2.1 2.0 0.9
 Foreign Trade Effect -0.5 0.3 0.4 0.2 0.1 0.2 -0.4
Domestic Final Sales 1.9 1.5 1.9 1.7 1.9 1.8 1.3
Demand Components
Personal Consumption 3.2 1.8 1.6 2.0 1.9 2.5 1.8
Business Fixed Investment 2.1 13.1 -1.8 4.1 8.0 8.6 0.7
Residential Investment 12.6 17.5 13.6 13.0 12.1 -1.4 -3.1
Government Spending -4.1 -7.0 3.9 -2.1 -1.7 -3.1 0.6
Chain-Type Price Index
GDP 1.2 1.0 2.7 1.6 1.8 2.1 1.3
Personal Consumption Expenditures 0.9 1.6 1.6 1.2 1.8 2.4 1.9
   PCE less Food & Energy 1.2 1.0 1.1 1.3 1.7 1.4 1.5
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