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

• First negative quarter in three years
• Final Q4 GDP was 2.4% annualized
• Final Q3 reading was +2.8% annualized
• Consumer spending: +1.8% vs +4.0% prior (some had this at +1.2% expected)
• 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): +9.8% vs -3.0% prior
• Final sales to domestic purchasers 2.3% vs 3.0% prior
• Full report

This report is negative but it’s even worse than it looks with a poor showing domestically and middling 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. That said, some were focused on the ‘final sales to domestic purchasers’ line and that was decent enough at 2.3% (and 3.0% when excluding government).

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.

A separate release showed the employment cost index in-line with the +0.9% reading expected.