WASHINGTON - For the first quarter, the advance estimate of real gross domestic product was weak, as expected, at 0.5% growth, after the fourth quarter posted just a 1.4% rise.
There are only scarce hard data so far in the second quarter for decent retail sales, and they suggest a continuation of this modest trend but with a slight uptick in growth.
The Q1 GDP report reflects a deceleration in consumption stemming from a 1.6% drop in durables spending, less exports and weak investment. The last reflects a drop in nonresidential spending (structures fell 10.7% and equipment dropped 8.6%, mainly in mining, where lower oil prices can be blamed for retrenchment). Equipment had the largest percentage drop since Q2:2009.
A larger decrease in inventories also cut 0.33 point from real growth. It is unclear if reduced trade impacted inventories or if this is a right-sizing of the slow manufacturing sector. Three periods in a row of inventories cutting growth is most unusual, so some rebound should be expected.
Missing March data assume higher construction and inventories in the GDP accounts, and are a reason the overall reading was not weaker.
GDP prices posted a 0.7% rise but the core PCE price index was up 2.1%, its worst since Q1:2012, and will disturb markets. This reflects an uptick in already released price data.
Annual revisions are coming on July 29 for GDP but will not change the price picture. They will cover three years and will incorporate annual manufacturing, government budget, farm and corporate data.
Market News International is a real-time global news service for fixed-income and foreign exchange market professionals. See
