1Q15 Gross Domestic Product (042915): An Annualized +0.2 Percent, With a 0.74-Point Inventory Buildup (UPDATE: Health Care is +0.62 Points)

Predictions:

• Yahoo’s Economic calendar has Briefing.com predicting an annualized 0.4 percent with the “Market” at 1.0 percent.
• A report on the decline in consumer confidence yesterday at the Associated Press predicted 1.0 percent to 1.5 percent. This morning, in a separate report, it’s 1.0 percent. (Ever since Dear Leader took office, the AP has been a laggard in recognizing downward forecast trends.)
• A Bloomberg writeup carries a prediction of 1.0 percent.
• The Federal Reserve Bank of Atlanta is at 0.1 percent. Moody’s is at 1.0 – 1.2 percent.

Readers here know that many hard statistics relating to orders, shipments and production have declined from what was seen during the fourth quarter. Some of them are lower than they were during the first quarter of 2014. These indicators would seem to presage a trip into contraction for today’s change in GDP.

But this ia a government report, so who knows? Additionally, we shouldn’t forget that today’s release is the first of three. In the first quarter of 2014, the first estimate was +0.1 percent and fell to -2.9 percent two months later, before being comprehensively revised in July to -2.1 percent.

The report will be here at 8:30 a.m.

HERE IT IS (full HTML link): Initial props go to the Federal Reserve Bank of Atlanta, which almost nailed it —

Real gross domestic product — the value of the production of goods and services in the United States, adjusted for price changes — increased at an annual rate of 0.2 percent in the first quarter of 2015, according to the “advance” estimate released by the Bureau of Economic Analysis. In the fourth quarter, real GDP increased 2.2 percent.

The Bureau emphasized that the first-quarter advance estimate released today is based on source data that are incomplete or subject to further revision by the source agency (see the box on page 3 and “Comparisons of Revisions to GDP” on page 5). The “second” estimate for the first quarter, based on more complete data, will be released on May 29, 2015.

The increase in real GDP in the first quarter primarily reflected positive contributions from personal consumption expenditures (PCE) and private inventory investment that were partly offset by negative contributions from exports, nonresidential fixed investment, and state and local government spending. Imports, which are a subtraction in the calculation of GDP, increased.

… The deceleration in real GDP growth in the first quarter reflected a deceleration in PCE, downturns in exports, in nonresidential fixed investment, and in state and local government spending, and a deceleration in residential fixed investment that were partly offset by a deceleration in imports and upturns in private inventory investment and in federal government spending.

The price index for gross domestic purchases, which measures prices paid by U.S. residents, decreased 1.5 percent in the first quarter, compared with a decrease of 0.1 percent in the fourth. Excluding food and energy prices, the price index for gross domestic purchases increased 0.3 percent, compared with an increase of 0.7 percent.

… The change in real private inventories added 0.74 percentage point to the first-quarter change in real GDP after subtracting 0.10 percentage point from the fourth-quarter change. Private businesses increased inventories $110.3 billion in the first quarter, following increases of $80.0 billion in the fourth quarter and of $82.2 billion in the third.

Without the inventory buildup — which relies on the assumption that you’re going to be able to sell what you’re making or buying, it’s a 0.5 percent contraction. Yikes.

More later, after I update the components table.

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UPDATE: Here are the components, showing yet another large contribution from health care, which is a relatively small item ($2.2 trillion out of $17.7 trillion, or 12.4% in current dollars) —

As seen above, health care has been over 60 percent (1.50 points out of 2.40 points) of the GDP increase during the past two quarters. Everything else has contributed less than one point.

The increases in health care costs can’t possibly be entirely supported by improvements in quality. They’re mostly a drain from spending available for everything else.

The combined +1.36-point contribution of inventory buildups and health care costs tell us that today’s report represents a substantive contraction of over 1 percent (annualized) as it affects average Americans.

I expect that the weather excuse machine will be pushed to its limit for the rest of the day.

UPDATE 2: The -0.40 point negative contribution in fixed investment excluding inventories is the worst such result since 2009.

UPDATE 3: Bloomberg economist Carl Riccadonna — “Disappointing Q1 GDP looks similar to what occurred last year, when growth was ultimately nudged into negative territory through revisions.”

UPDATE 4: That negative gross domestic purchases deflator (corrected from “GDP deflator,” which is not how the text reads; thanks to commenter Steve for that catch) of -1.5 percent also seems far more negative than it should be (the lower it is, the higher the resulting GDP growth).