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Economy in Brief

U.S. GDP Growth Declines 4.8% During Q1 2020 Due to Coronavirus Work Stoppages
by Tom Moeller  April 29, 2020

U.S. GDP declined 4.8% (SAAR) last quarter following a 2.1% Q4 2019 rise. A 3.8% fall had been expected in the Action Economics Forecast Survey. The decline was the first since Q1'14 and the largest since an 8.4% drop in Q4'08. The work stoppages which caused the decline began only at the end of the quarter, so much larger negative effects can be expected in Q2.

The decline in activity came as domestic final sales fell 5.4% (+0.4% y/y). The shortfall was paced by a 7.6% drop (+0.4% y/y) in personal spending which reflected a 16.1% decline (+1.3% y/y) in durable goods outlays. Motor vehicle outlays fell by one-third at an annual rate (-4.3% y/y) while home furnishings & appliances outlays dropped 6.4% (+2.3% y/y) after a 1.1% rise. Spending on recreational goods & vehicles eased 0.1% (+8.8% y/y) following last year's 12.1% increase. A 6.9% improvement (4.1% y/y) in nondurable goods purchases was led by a 25.1% rise (8.2% y/y) in outlays on food & beverages. That increase was offset by a 35.9% drop (-6.9% y/y) in apparel outlays and a 5.5% decline (-2.0% y/y) in spending on gasoline & oil. Purchases of services fell an aberrant 10.2% (-0.9% y/y) as health care outlays weakened by a record 18.0% (-2.8% y/y). Recreational spending fell by roughly one-third (-6.5% y/y) while food services & hotel outlays weakened 29.7% (-6.3% y/y). Running counter to this weakness was a 2.8% rise (2.5% y/y) in spending on financial services & insurance.

Business fixed investment fell 8.6% (-3.6% y/y), down for the fourth straight quarter. Outlays of structures dropped 9.7% (-9.5% y/y), also the fourth straight quarterly decline. Investment in equipment fell 15.3% (-5.8% y/y), the fourth decline in the last five quarters. Outlays on information processing equipment weakened 15.4% (-3.9% y/y) while investment in industrial equipment declined 7.1% (-3.1% y/y), off for the second straight period. A 30.6% decline (-13.7% y/y) in transportation equipment investment was accompanied by a 0.4% rise (2.9% y/y) in intellectual property products investment, which came after 5.4% growth during the prior four quarters.

Residential investment rose 21.0% (7.0% y/y), the largest of three straight quarterly increases.

Outlays by government edged 0.7% higher (2.4% y/y), the weakest of five consecutive quarterly gains. Federal government spending rose a weakened 1.7% (4.1% y/y) as defense investment edged 0.8% higher (2.7% y/y). Nondefense outlays strengthened 3.1% (6.4% y/y). Spending by state & local government improved a negligible 0.1% (1.4% y/y) after last year's 1.6% gain.

Inventory liquidation subtracted 0.5 percentage points from GDP growth and has been holding back growth for four consecutive quarters. Net exports added 1.3 percentage points to growth as an 8.7% decline (-2.9% y/y) in exports was outpaced by a 15.3% drop (-5.8% y/y) in imports.

The GDP price index rose at a steady 1.3% annual rate (1.7% y/y) in Q1. The PCE price index also rose at a fairly steady 1.3% rate (1.6% y/y). The business fixed investment price index rose 1.2% (1.0% y/y). The residential investment price index gained 2.0% and a weakened 2.4% y/y. The government price index rose 3.2% (2.1% y/y).

The GDP figures can be found in Haver's USECON and USNA database. 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.

Chained 2012 $ (%, AR) Q1'20 Q4'19 Q3'19 Q1'20 Y/Y 2019 2018 2017
Gross Domestic Product -4.8 2.1 2.1 0.3 2.3 2.9 2.4
  Inventory Effect (%-point) -0.5 -1.0 0.0 -0.6 0.1 0.1 0.1
Final Sales -4.3 3.1 2.1 0.9 2.2 2.8 2.3
  Foreign Trade Effect (%-point) 1.3 1.5 -0.1 0.5 -0.1 -0.2 -0.2
Domestic Final Sales -5.4 1.5 2.2 0.4 2.3 3.0 2.5
Demand Components
  Personal Consumption Expenditure -7.6 1.8 3.1 0.4 2.6 3.0 2.6
  Nonresidential Fixed Investment -8.6 -2.5 -2.3 -3.6 2.1 6.4 4.4
  Residential Investment 21.0 6.5 4.6 7.0 -1.5 -1.5 3.5
  Government Spending 0.7 2.5 1.7 2.4 2.3 1.7 0.7
Chain-Type Price Index
   GDP 1.3 1.3 1.8 1.7 1.8 2.4 1.9
    Personal Consumption Expenditure 1.3 1.4 1.5 1.6 1.4 2.1 1.8
        Less Food & Energy 1.8 1.3 2.1 1.8 1.6 1.9 1.6
    Nonresidential Investment 1.2 0.4 0.5 1.0 1.2 1.4 1.0
    Residential Investment 2.0 2.4 3.4 2.4 2.9 5.6 4.5
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