GDP growth: Tripping out of the gate?

First-quarter gross domestic product (GDP) in the U.S. increased at a seasonally adjusted annualized rate of 0.1%. The only thing really contributing to GDP growth in the first quarter was personal consumption expenditures, which increased 3.0% in the first quarter after increasing 3.3% in the fourth quarter. While not great, this is a decent amount of growth.

Part of the decline in GDP growth was expected. There was a large inventory buildup in the third and fourth quarters of 2013, and that’s typically followed by destocking—or, at least, less growth in inventories. Another part was likely due to the weather, probably being reflected in the decline in nonresidential fixed investment. Part of the deceleration was real—in the sense of not being blamed on the weather—as reflected in the downturn in exports. Exports of goods and services declined 7.6% in the first quarter after increasing 9.5% in the fourth quarter. These numbers seem to be a little at odds with survey data, so I suspect they will be revised.

The economy tripped out of the gate, but I think there were identifiable causes—payback from inventory building and nasty weather. We are likely going to see a revision to these initial estimates, and second-quarter GDP is likely going to post a jump from milder weather. So, we may see 1% GDP growth in the first quarter and 3% growth in the second quarter. The second half of the year could come in at 2.5%. These aren’t great numbers, but they’re not bad for investors. Profit growth is likely going to continue—as being demonstrated by first-quarter earnings reports—and the Federal Reserve is likely going to continue being very accommodative.

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