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Economy in Brief

U.S. GDP Hardly Increases; Capital Spending and Exports Decline
by Tom Moeller  April 30, 2014

Real GDP ticked 0.1% higher (2.3% y/y) last quarter following an unrevised 2.6% gain in Q4 2013. The Department of Commerce indicated in this advance estimate that growth was its weakest since Q4 2012. Growth was well short of consensus expectations for a 1.1% rise in the Action Economics Forecast Survey. The chain-type price index increased 1.3% (1.4% y/y), below the expected 1.6% gain.

Personal consumption expenditures provided the only support to growth last quarter with a 3.0% rise. Along with a 3.3% Q4 rise, these gains were the strongest since Q4 2010. Spending on services provided most of the lift to growth with a 4.4% advance (2.4% y/y). It was powered by a 9.9% surge (5.4% y/y) in health care expenditures. Durable goods spending gained 0.8% (4.4% y/y), held back by a 1.6% decline (+5.5% y/y) in furniture & household equipment. Motor vehicle outlays gained 0.8% (1.2% y/y) after little change in Q4. Nondurable goods outlays nudged up 0.2% (1.9% y/y), restrained by a 4.1% decline (+0.4% y/y) in apparel outlays.

Business investment eased 2.0% (+3.2 y/y), its first decline in a year. It reflected a 5.5% reduction (+2.0% y/y) in equipment outlays, dragged down by a 14.8% drop (-1.5% y/y) in information & processing spending. Industrial equipment countered the decline with a 10.3% rise (5.1% y/y). Structures spending slipped 0.2% (+7.0% y/y). Also to the downside was residential investment. Reflecting severe winter weather, its 5.8% decline (+2.2% y/y) followed a 7.9% Q4 drop.

Reduced government spending added to last quarter's minimal GDP growth. The 0.5% decline (-1.5% y/y) reflected a 2.4% drop (-4.7% y/y) in defense outlays and a 1.3% reduction (+0.2% y/y) in spending by state & local governments.

Foreign trade's effect on growth was a negative 0.8 percentage points. That was the first reduction in a year and reflected a 7.6% decline (+3.2% y/y) in exports. This shortfall also was the first in a year and was accompanied by a 1.4% drop (+2.3% y/y) in imports. Rounding out the negative effects on GDP growth was a slower rate of inventory accumulation. Its 0.6 percentage point reduction followed little change in Q4 and was only the second shortfall since Q4'12.

The news on pricing power was encouraging as the 1.3% advance (1.4% y/y) was the weakest since Q2'13. It reflected a moderate 1.4% rise (1.1% y/y) in consumer prices and a steady 1.2% gain (1.2% y/y) in business fixed investment prices. The government sector price index advanced 0.6% (1.3% y/y).

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 in the national accounts, including the new integrated economics accounts and the recently added GDP data for U.S. Territories. The Action Economics consensus estimates can be found in AS1REPNA.

A Guide to Tracking the U.S. Economy from the Federal Reserve Bank of St. Louis is available here.

Chained 2009 $, %, AR Q1'14 (Advance) Q4'13 Q3'13 Q1 Y/Y 2013 2012 2011
Gross Domestic Product 0.1 2.6 4.1 2.3 1.9 2.8 1.8
  Inventory Effect -0.6 -0.0 1.7 0.2 0.2 0.2 -0.2
Final Sales 0.7 2.7 2.5 2.0 1.7 2.6 2.0
  Foreign Trade Effect -0.8 1.0 0.1 0.2 0.2 0.2 0.2
Domestic Final Sales 1.5 1.6 2.3 1.9 1.5 2.4 1.8
Demand Components
Personal Consumption Expenditures 3.0 3.3 2.0 2.5 2.0 2.2 2.5
Business Fixed Investment -2.0 5.7 4.8 3.2 2.7 7.3 7.6
Residential Investment -5.8 -7.9 10.3 2.2 12.2 12.9 0.5
Government Spending -0.5 -5.2 0.4 -1.5 -2.3 -1.0 -3.2
Chain-Type Price Index
GDP      1.3 1.6 2.0 1.4 1.4 1.7 2.0
Personal Consumption Expenditures 1.4 1.1 1.9 1.1 1.1 1.8 2.4
 Less Food/Energy 1.3 1.3 1.4 1.1 1.2 1.8 1.4
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