Digging Into The GDP Numbers

by: Modeled Behavior

By Karl Smith

Real quick on this. Top line was 2.2%. Let's 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.

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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 estimate.