HUGE MISS ON GDP

 

SAM RO

The Bureau of Economic Analysis' advance estimate of first-quarter GDP is out and the numbers are mixed.

GDP growth slowed to just 0.1% in Q1 from 2.6% in Q4. This was much weaker than the 1.2% growth expected.

Economists agree that the unusually harsh winter weather was largely to blame.

Personal consumption grew by 3.0%, which was better than the 2.0% expected. This contributed to 2 percentage points of growth in GDP.

Then again, excluding the jump in health-care consumption, personal consumption would've been up by about 1.7%, notes Pantheon Macroeconomics' Ian Sheperdson.

"The deceleration in real GDP growth in the first quarter primarily reflected downturns in exports and in nonresidential fixed investment, a larger decrease in private inventory investment, a deceleration in PCE, and a downturn in state and local government spending that were partly offset by an upturn in federal government spending and a downturn in imports," said the BEA.

Nonresidential fixed investment, a measure of business spending or capital expenditures, fell 2.8%.

"The contraction in residential investment and cap-ex is more than simply weather," tweeted Bloomberg economist Joe Brusuelas. "Raises the hurdle for 3% growth in 2014."

Exports of goods and services tumbled 7.6% hacking a full percentage point off of GDP growth.

Government expenditures declined by 0.5%.

Real final sales — GDP less change in private inventories — increased by 0.7%, compared to a 2.7% increase in Q4. The change in private inventories shaved 0.57 percentage points off of growth.

"Overall, disappointing news on first-quarter GDP growth, but it was principally due to the weather," said Capital Economics' Paul Ashworth. "We anticipate that second-quarter GDP growth will rebound to 3.5%, and we don't expect these figures to affect the pace of the Fed's QE taper, particularly not when conditions in the labour market appear to be strengthening."

Let's not forget that this is only the very first estimate of Q1 GDP.

"Q1 GDP is highly preliminary," tweeted Deutsche Bank's Joe LaVorgna. "There will be three more revisions to these figures between now and the end of July.

Here's a table breaking down growth by GDP component:

Read more: http://www.businessinsider.com/q1-gdp-april-2014-2014-4#ixzz30NoP9Vth