U.S. GDP Decline in Q1'20 Is Unrevised; Corporate Profits Plunge

• GDP shortfall continues to reflect widespread component decline.

• Profits decline remains greatest since 2008.

• All sectors decline, except housing.

• Price inflation remains moderate.

U.S. GDP declined an unrevised 5.0% (SAAR) during Q1'20, as expected in the Action Economics Forecast Survey. It followed a 2.1% Q4'19 rise. The Q1 decline remained the first since Q1'14 and the largest since an 8.4% drop in Q4'08. Forecasters are calling for a much larger decline in Q2'20 due to business shutdowns.

After-tax corporate profits without IVA & CCA declined a slightly lessened 14.1% (-9.1% y/y) with the decline in business activity. Profits with IVA & CCA fell 12.3% (-6.9% y/y). Nonfinancial sector profits fell 15.4% (-9.0% y/y), which was more than estimated last month. Financial profits declined sharply, but the 8.0% fall in foreign sector profits (-0.2% y/y) was less than estimated last month.

The decline in domestic final sales was lessened to 4.6% last quarter from -4.8%. Consumer spending fell an unrevised 6.8% (+0.6% y/y). Durable goods outlays fell 13.8% (+2.0% y/y) as motor vehicle purchases weakened 30.0% (-3.2% y/y) and spending on home furnishings declined 3.9% (+2.9% y/y). Spending on recreational goods & vehicles rose 3.8% (9.9% y/y). Nondurable goods purchases increased 8.0% (4.4% y/y). Food & beverage consumption surged 30.4% (9.4% y/y) as eating-at-home supplanted dining out due to the coronavirus. Clothing outlays declined 34.7% (-6.5% y/y) and spending on gasoline & oil fell 15.3% (-4.6% y/y). Services outlays declined 9.8% (-0.8% y/y). Outlays on health care weakened 16.5% (-2.3% y/y) and remained a quarterly record. Recreational spending declined 31.3% (-6.3% y/y), and restaurant & hotel outlays dropped 31.2% (-6.8% y/y). Financial services & insurance spending fell 2.3% (+1.2% y/y), revised from a moderate gain.

Business fixed investment declined 6.4% (-3.1% y/y), revised from -7.9%. Structures outlays rose 2.7% (-6.5% y/y), revised from a moderate decline. Equipment outlays fell 16.6% (-6.2% y/y). Investment in information processing equipment declined 16.0% (-4.1% y/y) and industrial equipment spending fell 7.4% (-3.2% y/y). Transportation equipment outlays fell 31.1% (-13.8% y/y) but intellectual property products spending rose 1.4% (3.1% y/y).

An 18.2% increase (6.3% y/y) in residential investment was little revised and remained the largest of three straight quarterly gains.

Government spending improved an upwardly revised 1.1% (2.5% y/y) but remained the weakest of five straight quarterly increases. Federal government outlays rose 2.0% (4.2% y/y) reflecting a 1.1% rise (2.7% y/y) in defense outlays. Nondefense spending increased 3.3% (6.4% y/y). State & local government spending improved 0.6% (1.5% y/y).

Inventory liquidation subtracted 1.6 percentage points from GDP growth last quarter, revised from -1.4%. Improvement in the foreign trade balance added an unrevised 1.3 percentage points. Exports declined 9.0% (-3.0% y/y) and imports weakened 15.7% (-5.8% y/y).

The GDP price index rose an expected 1.4% (1.7% y/y), revised from 1.3%. The PCE price index gained 1.3% (1.6% y/y) and excluding food & energy, it rose 1.6% (1.7% y/y). The business fixed investment price index rose 1.1% (1.0% y/y), up sharply from gains in the prior two quarters, and the residential investment price series improved 2.0% (2.3% 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.