United States: Economic growth decelerates sharply in Q1
April 29, 2015
In the first quarter, GDP expanded at a seasonally adjusted annualized rate (SAAR) of 0.2%, according to an advance estimate released by the Bureau of Economic Analysis (BEA) on 29 April. The print came in well below the 2.2% expansion recorded in the fourth quarter of last year and also undershot market expectations of a 1.0% increase. The slowdown reflects contractions in fixed investment and exports as well as a softening in private consumption. A decrease in energy-related investment, a strong dollar coupled with subdued global demand, and harsh winter weather are seen as the main factors behind the poor performance in the aforementioned categories.
On the domestic side, private consumption expanded 1.9% in Q1, which was a far cry from the 4.4% tallied in Q4 and marked the weakest growth in four quarters. Moreover, non-residential fixed investment slumped from a 4.7% rise in Q4 to a 3.4% contraction in Q1, which marked the weakest result in more than five years. Residential fixed investment slowed to a 1.3% rise in Q1 (Q4: +3.8% quarter-on-quarter SAAR). Meanwhile, government spending contracted 0.8% in Q1 after having decreased 1.9% in the previous quarter. In contrast, business inventories contributed positively to growth.
Exports dropped 7.2% in the first quarter (Q4: +4.5% qoq SAAR) while imports increased a modest 1.8% (Q4: +10.4% qoq SAAR). Consequently, the external sector’s net contribution to overall growth deteriorated from minus 1.0 percentage points in the third quarter to minus 1.3 percentage points in the fourth.
Author: Carl Kelly, Economist