April 26, 2019

Huge: 1Q19 GDP’s First Reading Comes in At An Annualized 3.2 Percent

Filed under: Economy,MSM Biz/Other Bias,Taxes & Government — Tom @ 9:39 am

I only have one direct link to a lowball prediction (see below), but I’ve consistently heard and seen predictions of 1.5 – 2.0 percent for months.

The sources I CAN quote are these:

Well, the first reading for the first quarter came in at 3.2 percent, blowing away expectations (bolds are in the release):

Real gross domestic product (GDP) increased at an annual rate of 3.2 percent in the first quarter of 2019, according to the “advance” estimate released by the Bureau of Economic Analysis. In the fourth quarter of 2018, real GDP increased 2.2 percent.

The Bureau’s first-quarter advance estimate released today is based on source data that are incomplete or subject to further revision by the source agency. The “second” estimate for the first quarter, based on more complete data, will be released on May 30, 2019.

Real GDP: Percent change from preceding quarter

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

The acceleration in real GDP growth in the first quarter reflected an upturn in state and local government spending, accelerations in private inventory investment and in exports, and a smaller decrease in residential investment. These movements were partly offset by decelerations in PCE and nonresidential fixed investment, and a downturn in federal government spending. Imports, which are a subtraction in the calculation of GDP, turned down.

Current dollar GDP increased 3.8 percent, or $197.6 billion, in the first quarter to a level of $21.06 trillion. In the fourth quarter, current-dollar GDP increased 4.1 percent, or $206.9 billion.

The price index for gross domestic purchases increased 0.8 percent in the first quarter, compared with an increase of 1.7 percent in the fourth quarter. The PCE price index increased 0.6 percent, compared with an increase of 1.5 percent. Excluding food and energy prices, the PCE price index increased 1.3 percent, compared with an increase of 1.8 percent.

Personal Income

Current-dollar personal income increased $147.2 billion in the first quarter, compared with an increase of $229.0 billion in the fourth quarter. The deceleration reflected downturns in personal interest income, personal dividend income, and proprietors’ income that were partly offset by an acceleration in personal current transfer receipts.

Disposable personal income increased $116.0 billion, or 3.0 percent, in the first quarter, compared with an increase of $222.9 billion, or 5.8 percent, in the fourth quarter. Real disposable personal income increased 2.4 percent, compared with an increase of 4.3 percent.

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UPDATE: Martin Crutsinger at the Associated Press conceded that the news was good, but then tried to convince readers that the result is a one-off (bolds are mine) —

The U.S. economy grew at a solid 3.2% annual rate in the first three months of the year, a far better outcome than expected, overcoming a host of headwinds including global weakness, rising trade tensions and a partial government shutdown.

… However, about half the gain reflected two factors not expected to last — a big jump stockpiling by businesses and a sharp contraction in the trade deficit.

The “big jump in stockpiling” contributed 0.65 points to GDP. What’s remarkable is that this contribution follows a huge +2.33-point contribution in Q318 and a smaller +0.11-point contribution in Q418. What’s really happening is that businesses are confident that consumers will continue to spend, and are making sure they have those goods on their shelves or available for delivery.

Trade data contributed 1.03 points, but it doesn’t look like a one-off from here. Imports declined (contributing 0.45 points) and exports increased (+0.58 points). It’s reasonable to believe that President Trump’s aggressive fair-trade efforts are bearing fruit. If so, the positive contributions from trade will likely continue.

UPDATE 2: I should also remind readers that, as CNBC’s Rick Santelli notes in his reax video at CNBC, that first quarter is supposed to the “dog of the year.” During the Obama administration, there was incessant whining about “residual seasonality” which supposedly penalizes the first quarter every year.

We’re not hearing a word about that today from anywhere else, are we?

UPDATE 3: The economy has grown by 3.21 percent during the past four quarters.

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