Wednesday, April 29, 2009

First quarter GDP ouch!

GDP numbers come in lower at -6.1%. This is lower than expected and is especially negative given the talk about "Green Shoots" in other data. The detailed data is not a pleasant story. Real GDP is down 2.6 YOY; however, the durable and nondurable foods are less negative than the fourth quarter. It is the gross private investment which is the killer. It fell 24.2 percent yoy. Imports and and exports are both off by double digits and even government spending has slowed.

I am going have to wait for May to get some positive numbers.

2 comments:

Anonymous said...

People are trying to find anything optimistic. What's your take on the slump of inventory? Does low inventory mean that Q2 GDP will be boosted?

Mark Rzepczynski said...

Inventories have always been the most volatile component of GDP. This has not changed in 2008. A lowering of inventories sets the stage for future growth as these levels are built up, but that is assuming that we are moving back to the old level of GDP, say 3% long-term. If growth expectations are lower, there can be a lower level of inventories.

Total nominal inventories fell 136 billion which is the largest decline ever. This adjustment is much steeper that the 1991 recession. The percent decline to GDP has been much faster than other sectors and has picked up since the last quarter. This is all good, but what is not good is the fact that fixed investment has fallen much faster. Businesses are changing expectations and cutting back on production and investment under the anticipation that we will have a prolonged slowdown. This cannot be good even for those who want to talk about "green shoots" in the data.