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Wednesday, April 30, 2008

Economy grew at .6% in first quarter

Economy grew at .6% in first quarter. Rising inventories helped prevent a slump. If we got a bump from rising inventories, we may get a lower reading in the next quarter.

Price inflation gauges eased in the first quarter. For instance, the price index for personal consumption expenditures rose by 3.5% after increasing 3.9% in the fourth quarter. The PCE price gauge excluding food and energy rose 2.2%, after increasing 2.5% in the fourth quarter.

Inflation seems like the biggest joke to me. It seems like we are the only country in the world avoiding high inflation.

Another component of GDP, housing, took a big bite out of the economy. Residential fixed investment dropped by 26.7%, reducing overall GDP by 1.23 percentage points. Fourth-quarter investment had fallen by 25.2%. The 26.7% plunge was the deepest since 35.1% in fourth-quarter 1981.

It's going to be a while before housing adds to GDP.

Business spending fell by 2.5%. Investment in structures went down 6.2%. Equipment and software outlays decreased 0.7%. Overall fourth-quarter outlays by businesses had climbed 6.0%

Inventories rose slightly in the first quarter. Stockpiles of all goods increased by $1.8 billion, after going down $18.3 billion in the fourth quarter and going up $30.6 billion in the third quarter. The acceleration boosted January-March GDP by 0.81 percentage point. But the small increase in inventories was likely unintended, fed by slowing demand, and could be followed by a second-quarter drop that detracts from GDP in that period.

http://online.wsj.com/article/SB120955760584356061.html?mod=hps_us_whats_news

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