Real quick on this. Top line was 2.2%. Lets dig deeper.
Durable Goods Consumption: Added 1.13 pts. About in line with what I would have thought given the surge in cars, but cars was actually a little weak and other durables a little strong.
Non-Durable Goods Consumption: Added .35 pts. Surprisingly strong given the secular death of gasoline. Gasoline consumption has subtracted from GDP for the last 6 quarters and added nothing in the two before that. The US is de-gasolining and that has tended to make non-durables flat.
Consumer Services: Added .57 pts. Much weaker than I expected because I thought utilities would add big this quarter after subtracting big last quarter. But, no another major draw on utilities at –.23 pts. Yet, there is no serious way this is a trend. All of this will bounce back mechanically as we move into the Summer unless we have “The coolest summer on record” and electricity use dies.
Non-Residential Structures: Subtracted .35 pts. Larger subtraction than I would have expected. We know we are getting some subtraction as Natural Gas fracking in the Northeast cools down and Eagle Ford has yet to hit its stride but this is still a little bigger than I would have thought. Not quite sure what all is happening.
Equipment and Software: Added .13 pts. We knew this would be weak in January because of depreciation credits, however, this is a little weaker than census reports would have suggested given Feb and March. I am inclined to expect this will be revised up.
Inventories: Added 0.59 pts. I don’t have a good sense for what this means in a practical way or what to expect though I know petroleum product and natural gas storage is a big deal and went up.
Residential Construction: Added 0.40 pts. Slowly but surely as the starts data indicate. This should get bigger going into the year.
Net Exports: Subtracted 0.01pts. Not bad, though we should expect this to get worse as Europe does.
Federal Government: Subtracted 0.46 pts. SMACK. That is much bigger than expected and almost all comes from military drawdown. Two big quarters in a row of shrinking military expenditures.
State and Local: Subtracted 0.14. Surprisingly high and looks like its coming from lack of highway investment. What the political endgame on that is I don’t know.
All-in-all it looks decent. Government and utilities are not really driven by the underlying dynamics. Main area of concern is non-residential fixed investment where both structures and equipment and software are weaker than I would have supposed.
Also for those tracking GDI, personal income plus taxes on production grew by 140 Billion, adding 3.6 pts to GDI. A rough guess of 35 Billion in net corporate profit growth in the first quarter gives me 4.6% GDI growth est.
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Friday ~ April 27th, 2012 at 10:57 am
CHART OF THE DAY: REMINDER: This Is What’s Crushing GDP – - BizNewsX - Business News AggregatorBizNewsX – Business News Aggregator
[...] Karl Smith clarifies: [...]
Friday ~ April 27th, 2012 at 12:13 pm
TheMoneyIllusion » Spending on cars and houses doesn’t matter
[...] This Karl Smith post suggests the GDP number may eventually be revised [...]
Friday ~ April 27th, 2012 at 1:00 pm
Friday links: how to scale | Abnormal Returns
[...] Q1 US GDP growth: no great shakes. (Real Time Economics, Calculated Risk, EconomPic Data, Money Game, Daniel Gross, Modeled Behavior) [...]
Friday ~ April 27th, 2012 at 1:34 pm
The GDP release and how some seem to be content with what we´ve got. | Historinhas
[...] the message I got from these two Karl Smith´s posts from today. The first is an analysis of the contribution to growth of the different components. It concludes with the [...]
Friday ~ April 27th, 2012 at 1:41 pm
dwb
I thought utilities would add big this quarter after subtracting big last quarter.
warm weather in the winter means lower electric and heating demand (as does cooler weather in the summer. There is no mean reverting tendency in the weather, so the fact that they substract one quarter says nothing about the next.
and yes, some weather patterns are indicating a cool summer thanks to el-nino. http://www.bloomberg.com/news/2012-04-24/el-nino-may-cool-u-s-this-summer-cutting-electric-need.html
Friday ~ April 27th, 2012 at 1:49 pm
jasonrodrgz
Hey Karl-
As of recent, the initial readings of GDP have given a slightly more pessimistic look at the economy and we’ve seen slight upward revisions that have followed.
I’m wondering what your take on a later reading of Q1 GDP is likely to show. Given what we currently know of q1 activity, is the likelihood of an upward revision more or less likely than a downward one?
GDI has seemed like a more optimistic view of economic activity, and there seems to be a pattern gdp revisions moving closer to gdi readings.
Thanks!
Friday ~ April 27th, 2012 at 1:59 pm
Sluggish U.S. growth continues | Fox Website Directory Blogs and eBooks
[...] are all hoping for something much better than what we have so far. For other takes, see Phil Izzo, Karl Smith, and the always indispensable Calculated [...]
Friday ~ April 27th, 2012 at 2:21 pm
Econbrowser: Sluggish U.S. growth continues
[...] are all hoping for something much better than what we have so far. For other takes, see Phil Izzo, Karl Smith, and the always indispensable Calculated [...]
Friday ~ April 27th, 2012 at 2:28 pm
John A
“Non-Residential Structures: Subtracted .35 pts. Larger subtraction than I would have expected. We know we are getting some subtraction as Natural Gas fracking in the Northeast cools down and Eagle Ford has yet to hit its stride but this is still a little bigger than I would have thought. Not quite sure what all is happening.”
Karl – PLEASE I have commented here before on this matter: Drilling oil/gas wells DOES NOT count toward non-residential structures!! It’s part manufactured good, and part business service.
It’s very frustrating commenting on blogs to authors who do not read the comments, even though it can often do them a world of good to do so.
Friday ~ April 27th, 2012 at 4:41 pm
Measure for Measure
Nominal GDP increased 3.8% in Q1 2012, identical to the Q4 2011 figure. That is way too low, especially given our excess capacity. IIRC, Scott Sumner’s target is 5.0%. Mine would be 6.0%, all the better to avoid liquidity traps.
Friday ~ April 27th, 2012 at 10:08 pm
John A
I stand corrected – oil and gas wells *are* classified as “Non-residential structures” by the BEA, according to their website. That’s a *bizarre* way to classify them, as the cost of the physical materials in the well are minor compared to the cost of the services provided in drilling the well. This is especially true for gas wells, which, above ground at least, consist of little more than a smallish series of valves and pipes.
That said, there are a lot of other kinds of structures in the “Non-residential structures” category, so I doubt you could draw many conclusions about the rate of oil/gas drilling just from looking at the broad category of “Non-residential structures.”
Friday ~ April 27th, 2012 at 11:29 pm
CHART OF THE DAY: REMINDER: This Is What’s Crushing GDP | ccnew
[...] Karl Smith clarifies: [...]
Saturday ~ April 28th, 2012 at 9:16 am
rjsigmund
i dont know if it relates to the lack of highway investment. but our congresscritters recently passed the 9th short term transportation bill, good for 90 days…cant plan much infrastructure in a 90 day funding window…
Sunday ~ April 29th, 2012 at 7:24 pm
1st quarter GDP, the social security annual report, housing price indexes, et al | r.j.'s space
[...] half of the PCE contribution came from purchases of durable goods (like cars & appliances); consumer services spending was weakened by decreased utility use in the warmest 1st quarter on record, and despite higher gas prices, spending for fuel subtracted [...]
Monday ~ April 30th, 2012 at 11:05 am
Sluggish U.S. growth continues | Bear Market Investments
[...] are all hoping for something much better than what we have so far. For other takes, see Phil Izzo, Karl Smith, and the always indispensable Calculated [...]