US Q1 advance GDP -0.3% vs +0.3% expected

• Final Q4 GDP was 2.4% annualized
• Final Q3 reading was +2.8% annualized
• Consumer spending: +1.8% vs +4.0% prior
• GDP final sales (excluding inventories): -2.5% vs 3.3% prior
• GDP price index (GDP deflator): 3.7% vs 3.0% expected
• Core PCE (excluding food & energy): 3.5% vs 3.3% expected
• PCE price index: 3.6% vs 2.4% prior
• PCE services excluding energy and housing +3.4% vs +2.3% prior
• Business investment (nonresidential fixed investment): % vs % prior

This report is negative but it’s even worse than it looks with a poor showing domestically and from the consumer. In addition, the inflation numbers were hotter.

The ‘consensus’ here was +0.3% but that didn’t fully take into account the latest poor trade data so the market was likely closer to the actual reading, and that’s what Bloomberg’s consensus had adjusted to.

Contributors and subtractors:

• Consumption: +1.21% vs +2.70% prior
• Government: -0.25% vs +0.52% advance
• Net International trade: -4.83% vs +0.26% advance
• Inventories: +2.25% vs -0.84% advance

This highlights what happened in the quarter as companies surged imports and stuffed them into inventories. The reversal of that will be a net positive in the quarter ahead but it will be met with a drawdown in inventories and falling consumption.

This article was written by Adam Button at www.forexlive.com.