Thursday, May 29, 2014

First Quarter GDP Growth Was Negative

Real GDP growth for the first quarter was revised down to a decline of 1.0% in the BEA’s second estimate. Growth was revised down from an initial estimate of 0.1%. The decline in GDP was largely driven by downward revisions to inventories. Adverse weather in the first quarter had a greater impact on GDP than originally estimated. Growth in the first quarter dropped substantially from the 2.6% growth seen in the fourth quarter. GPD growth was last negative in the first quarter of 2011.

Consumption was hardly revised. Its contribution to GDP was changed to 2.1% from 2.0% in the initial estimate. Consumption remains the driver of GDP and was the only category to improve.

Inventories reduced growth by 1.6%, a marked decline from the 0.6% growth reduction in the first estimate. Inventories were the single largest drag on growth. The government drag increased slightly to 0.2%, with the bulk of the drag coming from the state and local governments. Federal nondefense positively contributed to growth. Fixed investment improved slightly from the initial estimate, with less of a drag on GDP. Both residential and non-residential investments were less of a drag on GDP in the second estimate.

Due to the improved weather and the typical fluctuation of inventories, the second quarter is expected to see stronger, more normalized gains.

Read the BEA release.

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