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Economy in Brief

U.S. GDP Declines Unexpectedly in Q1'22
by Tom Moeller  April 28, 2022

• Int'l trade deficit subtracts near-record from total GDP.

• Inventory decumulation is moderate.

• Domestic demand picks up.

U.S. real GDP contracted by 1.4% (SAAR) last quarter following an unrevised 6.9% rise during Q4'21. It was the only quarter of negative growth since the end of the recession in Q2'20. The Action Economics Forecast Survey expected a 1.0% increase.

Deterioration in the foreign trade balance subtracted 3.2 percentage points from growth as exports fell 5.9% (+4.1% y/y) and imports jumped 17.7% (11.7% y/y). Inventory liquidation also reduced growth by 0.8 percentage points.

Growth in final demand to domestic purchasers improved last quarter. The 2.6% rise followed a 1.7% gain in Q4'21 and was the largest of three quarters of modest growth. Personal consumption rose 2.7%. Motor vehicle buying gained 10.4% (-11.7% y/y) and spending on recreational goods & vehicles increased 6.7% (5.9% y/y). Furniture & appliance purchases fell 4.7% (-5.1% y/y). ln the nondurable goods category, apparel spending declined 5.9% (+5.9% y/y) while gasoline expenditures fell 15.0% (+6.9% y/y). In the services area, recreation expenditures rose 5.4% (21.4% y/y) while restaurant & hotel spending rose 4.9% (19.5% y/y). Health care expenditures increased 3.7% (5.6% y/y) while outlays on housing & utilities firmed 2.8% (1.2% y/y).

In the capital goods sector, spending rose 9.2% but structures investment fell 0.9% (-4.1% y/y). Equipment investment countered that decline and surged 15.4% (6.8% y/y). Investment in computers strengthened 22.4% (9.4% Y/Y) and industrial equipment investment surged 23.8% (18.9% y/y). Transportation equipment investment fell 9.2% (-7.1% y/y). Investment in intellectual property products increased 8.1% (9.6% y/y).

Residential investment rose 2.1% last quarter, equal to the gain in Q4'21. These increases followed two straight quarters of sharp decline.

In the government sector, spending declined 2.7%. Federal government outlays fell 5.9% (-5.2% y/y) as defense spending declined 8.5% (-4.4% y/y). State & local government outlays eased 0.8% (+0.6% y/y).

Pricing power continued to strengthen last quarter. The 8.0% increase in the chain-type price index exceeded expectation for a 7.3% rise. It was the largest since Q3'81 and paced by a 17.8% surge in the cost of residential investment. Overall consumer prices rose 7.0%. The nondurable consumer goods price index rose 14.9% (8.8% y/y) with the surge in gasoline prices. The durable consumer goods price index rose 6.5% (10.9% y/y) and the consumer services price index gained 4.6% both q/q and y/y. Outside of food & energy, the price index increased 5.2% both q/q and y/y. The business investment price index increased 6.8% (4.9% y/y). The government sector price index increased 9.1% (7.2% y/y).

The GDP figures can be found in Haver's USECON and USNA databases. 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) Q1'22 (Adv Estimate) Q4'21 Q3'21 Q1'22 Y/Y 2021 2020 2019
Gross Domestic Product -1.4 6.9 2.3 3.6 5.7 -3.4 2.3
  Inventory Effect (% point) -0.8 5.3 2.2 1.4 0.4 -0.5 0.1
Final Sales -0.6 1.5 0.1 2.2 5.3 -2.9 2.2
  Foreign Trade Effect (% point) -3.2 -0.2 -1.3 -1.1 -1.4 -0.3 -0.2
Domestic Final Sales 2.6 1.7 1.3 3.3 6.5 -2.5 2.4
Demand Components
  Personal Consumption Expenditure 2.7 2.5 2.0 4.7 7.9 -3.8 2.2
  Nonresidential Fixed Investment 9.2 2.9 1.6 5.7 7.4 -5.3 4.3
  Residential Investment 2.1 2.1 -7.7 -4.0 9.2 6.8 -0.9
  Government Spending -2.7 -2.6 0.9 -1.6 0.5 2.5 2.2
Chain-Type Price Index
   GDP 8.0 7.1 6.0 6.8 4.2 1.3 1.8
    Personal Consumption Expenditure 7.0 6.4 5.3 6.3 3.9 1.2 1.5
       Less Food & Energy 5.2 5.0 4.6 5.2 3.3 1.4 1.7
    Nonresidential Investment 6.8 7.8 4.3 4.9 1.6 0.6 1.3
    Residential Investment 17.8 11.9 14.8 14.9 11.0 3.3 2.9
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