Advance look at 1st-quarter GDP – +0.2%

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Advance look at 1st-quarter GDP - +0.2%

By Steve Eggleston

On Wednes­day, the Bureau of Eco­nomic Analy­sis released their first look at 1st-​quarter GDP, and found that the real (or inflation-​adjusted) GDP grew at an annu­al­ized 0.2%. While the eco­nomic experts had expected a fur­ther drop-​off from the 4th quarter’s 2.2% growth, they weren’t expect­ing it to be below 1.0%.

None of the three major pos­i­tive con­trib­u­tors to real GDP growth can really be con­sid­ered a pos­i­tive. The largest pos­i­tive con­trib­u­tor, change in non-​farm pri­vate inven­to­ries (+0.76 per­cent­age points), along with non-​existent income growth, strongly sug­gests that those inven­to­ries busi­nesses built up in hopes of an eager buy­ing pub­lic will end up hav­ing to be sold at a sub­stan­tial dis­count instead.

For the fourth quar­ter in a row, spend­ing on health care (no, not insur­ance, care itself) con­tributed at least +0.42 per­cent­age points to GDP growth, with this quarter’s +0.62 percentage-​point con­tri­bu­tion trail­ing only last quarter’s +0.88 percentage-​point con­tri­bu­tion. Here I thought Oba­maCare was sup­posed to bend the health care cost curve down. Instead, over the last year, spend­ing on health care has grown 6.2% on a non-​inflation-​adjusted basis, and 5.5% on a specific-​to-​the-​industry inflation-​adjusted basis.

Despite a col­lapsed energy sec­tor, and a win­ter that was, for most of the coun­try, far less severe than last win­ter, increased spend­ing on hous­ing and util­i­ties pro­vided a +0.59 percentage-​point boost to real GDP. In fact, taken together, spend­ing on health care and housing/​utilities accounted for almost all of the +1.31 percentage-​point increase in per­sonal con­sump­tion expenditures.

I’m almost reluc­tant to dis­cuss the indi­ca­tion that, for the sec­ond quar­ter in the row, the advance look at GDP indi­cated a period of defla­tion, because the BEA found a mod­icum of infla­tion between the 1st and sub­se­quent reads of 4th-​quarter GDP. This time around, the implicit price defla­tor (the BEA’s term for infla­tion) for GDP as a whole was –0.1%, with the implicit price defla­tor for gross domes­tic pur­chases at –1.6%.

By Steve Eggleston

On Wednesday, the Bureau of Economic Analysis released their first look at 1st-quarter GDP, and found that the real (or inflation-adjusted) GDP grew at an annualized 0.2%. While the economic experts had expected a further drop-off from the 4th quarter’s 2.2% growth, they weren’t expecting it to be below 1.0%.

None of the three major positive contributors to real GDP growth can really be considered a positive. The largest positive contributor, change in non-farm private inventories (+0.76 percentage points), along with non-existent income growth, strongly suggests that those inventories businesses built up in hopes of an eager buying public will end up having to be sold at a substantial discount instead.

For the fourth quarter in a row, spending on health care (no, not insurance, care itself) contributed at least +0.42 percentage points to GDP growth, with this quarter’s +0.62 percentage-point contribution trailing only last quarter’s +0.88 percentage-point contribution. Here I thought ObamaCare was supposed to bend the health care cost curve down. Instead, over the last year, spending on health care has grown 6.2% on a non-inflation-adjusted basis, and 5.5% on a specific-to-the-industry inflation-adjusted basis.

Despite a collapsed energy sector, and a winter that was, for most of the country, far less severe than last winter, increased spending on housing and utilities provided a +0.59 percentage-point boost to real GDP. In fact, taken together, spending on health care and housing/utilities accounted for almost all of the +1.31 percentage-point increase in personal consumption expenditures.

I’m almost reluctant to discuss the indication that, for the second quarter in the row, the advance look at GDP indicated a period of deflation, because the BEA found a modicum of inflation between the 1st and subsequent reads of 4th-quarter GDP. This time around, the implicit price deflator (the BEA’s term for inflation) for GDP as a whole was -0.1%, with the implicit price deflator for gross domestic purchases at -1.6%.