First Quarter GDP Close To Expectations

Consumer spending, largely on services, helped hold up first-quarter real GDP which came in at an annualized plus 0.5 percent rate and just below the Econoday consensus for 0.7 percent. Consumer spending (personal consumption expenditures) rose at a 1.9 percent rate, down only 5 tenths from the fourth quarter. Within this, spending on services rose an intrend 2.7 percent to offset a 1.6 percent decline in durable goods which were hit by weak vehicle sales.

Residential investment, up 14.8 percent, is a highlight of the report and helped offset a sharp 5.9 percent decline in nonresidential investment where weak energy drilling is taking a big toll. Inventories rose in the quarter but at a slower rate which is a negative for GDP while exports, reflecting weak global demand, were a negative for a second quarter in a row. Government purchases were a small plus in the quarter.

Price data are mixed with the price index up only 0.7 percent in the quarter, down 2 tenths from the fourth quarter. But the core deflator is up, 7 tenths higher to plus 1.9 percent which should get some attention.

The consumer bailed out the first quarter, both on services and also on fixing on their homes. But otherwise the report points to nearly no momentum going into the Spring quarter.

Recent History Of This Indicator:
The first estimate for first-quarter GDP is expected to come in at only plus 0.7 percent in what would be the weakest result since plus 0.6 percent in the first-quarter last year. But unlike last year, this year's first quarter was not hit by severe weather which underscores how soft the quarter likely was. Consumer spending, though soft, may improve slightly while residential investment, which has been strong, may slow. Inventories are expected to pull down GDP as businesses destocked. Net exports may also be a negative. The GDP price index is expected to further soften, to only plus 0.5 percent from 0.9 percent in the fourth quarter.