1Q2015 Gross Domestic Product: First (Advance) Estimate

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According to the “advance” estimate by the Bureau of Economic Analysis (BEA), 1Q2015 growth in real U.S. gross domestic product (GDP) was pegged at a seasonally adjusted and annualized rate of 0.2% -- down roughly 2.0 percentage points from the 4Q2014’s final 2.2% estimate. Analysts had expected 1.0% (ranging from +0.2 to 2.4%). Personal consumption expenditures (PCE) and private domestic investment (PDI) contributed to 1Q growth, while net exports (NetX) and government consumption expenditures (GCE) subtracted from it.

Negatives:

* Consumer spending for goods grew at a 0.05% annualized rate, down from 4Q’s +1.07%.

* Consumer spending for services grew at 1.26% (the majority in non-discretionary healthcare, housing and utilities), down from 4Q’s +1.91%.

* Fixed investment contracted (-0.40%), down from 4Q’s +0.72%.

* Exports shrank at a -0.96% annualized rate, down from 4Q’s +0.59%, thanks in large part to a strong dollar.

Positives:

* Inventory growth contributed +0.74% to the headline number, up from 4Q’s -0.10%.

* Imports subtracted less from the headline number (-0.29%, compared with 4Q’s -1.62%).

* Government spending contracted at a slower (-0.15%) annualized rate, thereby boosting the headline number by +0.20%. 

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Perhaps the item most worthy of note is that without the record buildup of inventories (+$121.9 billion in nominal dollars), 1Q GDP would have been -2.6% instead of the reported 0.2%.

The foregoing comments represent the general economic views and analysis of Delphi Advisors, and are provided solely for the purpose of information, instruction and discourse. They do not constitute a solicitation or recommendation regarding any investment.