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Economy in Brief

U.S. GDP Growth is Negligible as Business Investment and Exports Decline
by Tom Moeller  April 29, 2015

Real GDP growth of 0.2% (3.0% y/y) last quarter followed an unrevised 2.2% Q4 gain. The increase disappointed expectations for a 1.1% rise in the Action Economics Forecast Survey. Last quarter's economic performance was its weakest in a year, held back by a 3.4% decline in business investment and deterioration in the foreign trade deficit.

The decline in investment was led by a 23.0% shortfall (-1.0% y/y) in spending on structures. It reflected a 48.6% drop (-6.6% y/y) in mining, shafts & wells. Equipment investment was little-changed (+5.6% y/y) as information processing (+6.7% y/y) as well as industrial equipment (+6.0% y/y) declined at roughly 8.0% annual rates. Transportation equipment jumped 23.7% (13.1% y/y).

Deterioration in net exports sapped 1.3 percentage points from GDP growth last quarter and has subtracted 0.4 percentage points during the last year. Exports fell at a 7.2% rate (+3.0% y/y) due to recessions abroad. The decline was the first in a year. Notable shortfalls were realized in most categories. Services exports, however, gained 7.3% (4.6% y/y) due to foreigners' visits to the U.S. Imports increased 1.8% (5.5% y/y) as goods rose 0.9% (5.4% y/y) and services jumped 6.3% (5.7% y/y).

Government investment fell 0.8% (+0.8% y/y). State & local spending fell 1.5% (+1.1% y/y) but federal spending gained 0.3% (0.3% y/y).

Personal consumption expenditures offset some of these pressures with a 1.9% rise, though that was the weakest gain in a year. Lower prices prompted a 5.6% jump (3.0% y/y) in fuel consumption. That was accompanied by a 4.0% rise (10.5% y/y) in recreational goods & vehicles and a 3.3% gain (7.2% y/y) in furniture & household equipment. Motor vehicles spending eased 2.9% (+7.5% y/y), its first decline in nearly two years. Services spending grew at a 2.8% rate (2.6% y/y), held back by a 0.1% slip (+0.6% y/y) in recreation. Health care spending ramped up 5.5% both quarterly and y/y.

Residential investment grew at a modest 1.3% rate (4.2% y/y), the weakest rise since a decline one year ago.

Inventory investment added 0.7 percentage points to economic growth last quarter. The addition followed subtractions during four of the prior five quarters.

Economic weakness helped the chain price index slip at a 0.1% annual rate (+0.9% y/y). Consumer prices declined 2.0% (+0.3% y/y), as gasoline prices declined at a 63.2% annual rate (-30.4% y/y). The price index excluding food & energy rose 0.9% (+1.3% y/y). Business fixed investment prices rose 0.6% (0.8% y/y) while residential investment prices gained 2.2% (3.6% y/y), the weakest rise in three quarters.

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 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 Q1'15 (Advance Estimate) Q4'14 Q3'14 Q1 Y/Y 2014 2013 2012
Gross Domestic Product 0.2 2.2 5.0 3.0 2.4 2.2 2.3
  Inventory Effect 0.7 -0.1 -0.0 0.5 0.1 0.0 0.1
Final Sales -0.5 2.3 5.0 2.5 2.3 2.2 2.2
  Foreign Trade Effect -1.3 -1.0 0.8 -0.4 -0.1 0.3 0.1
Domestic Final Sales 0.7 3.3 4.1 2.9 2.4 1.9 2.1
Demand Components
Personal Consumption Expenditures 1.9 4.4 3.2 3.0 2.5 2.4 1.8
Business Fixed Investment -3.4 4.7 8.9 4.9 6.3 3.0 7.2
Residential Investment 1.3 3.8 3.3 4.2 1.6 11.9 13.5
Government Spending -0.8 -1.9 4.4 0.8 -0.2 -2.0 -1.4
Chain-Type Price Index
GDP      -0.1 0.1 1.4 0.9 1.5 1.5 1.8
Personal Consumption Expenditures -2.0 -0.4 1.2 0.3 1.3 1.2 1.8
 Less Food/Energy 0.9 1.1 1.4 1.3 1.4 1.3 1.8
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