U.S. GDP Contracted Less Than Expected in Q1 2015

U.S. GDP Upwardly RevisedThe U.S. economy contracted less than expected during the first quarter, boosted by strong household spending, inventories, and residential fixed investment.

On Wednesday June 24th, the Bureau of Economic Analysis (BEA) released its third and final estimate of the U.S. gross domestic product (GDP) for the first quarter of 2015. (Source: Bureau of Economic Analysis, June 24, 2015.)

The BEA’s final estimate says that real GDP declined at an annualized rate of 0.2% in the first quarter of 2015. This is better than the second estimate of a 0.7% decline published last month, but worse than the 0.2% growth reported in April.

One thing that turned out better than expected was consumption. Personal consumption increased by 2.1% in the first quarter, though not as impressive as the 4.4% growth in the previous quarter. Among consumption, durable goods gained 1.3%; non-durables increased 0.8%; while services surged 2.7%.

One factor that contributed to the decline in GDP was investment. Nonresidential fixed investment declined two percent, with investment in nonresidential structures decreasing a staggering 18.8%. However, investment in intellectual property products gained a solid 4.9%, and residential fixed investment increased 6.5%.

Exports were another drag of the U.S. first-quarter GDP, which declined 5.9%. In the fourth quarter last year, exports gained 4.5%. Imports increased an impressive 7.1%. But that, however, did not help with the GDP count, as imports are subtracted from exports to calculate net export.

Government spending did not boost GDP in the first quarter, either. Federal government consumption expenditures and gross investment stayed unchanged in the period. National defense decreased 1.2%, while nondefense gained two percent. At the state and local government level, consumption expenditures and gross investment declined one percent, compared to an increase of 1.6% in the fourth quarter.

Inventories piled up, adding 0.45% to the change of first-quarter GDP. Private companies increased inventories by $99.5 billion, quite a bit more than the $80.0 billion stocked in the fourth quarter of last year.

Also Read: U.S. GDP Contracts in 1Q15; Economy Halfway to a Recession This Year