The advance report on first quarter GDP was up 3.2%, outstripping even the most optimistic estimates. Growth was solid for personal consumption expenditures — durables spending was weak but services more than made up for it . Gross investment was driven by nonresidential fixed investment. Government consumption was also up substantially. Net exports improved sharply from the fourth quarter and the change in private inventories was a large plus.
Calls for the Fed to cut interest rates to support growth will ring hollow after these numbers. However, it should be cautioned that this is only the advance report and there may be future downward revisions. Nonetheless, these would have to be surprisingly large to reduce growth to anything but healthily expansionary.
The price index for personal consumption in the first quarter fell to 0.6% from 1.5% while the core index was down to 1.3% from 1.8%. This suggest that inflation has lost upward momentum but probably doesn’t take into account some of the more recent increases in energy costs. We’ll get a closer look with the monthly data on personal income and spending in March when the report is released on Monday, April 29 at 8:30 ET.
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