GDP Quarter 1
A lot of jostling in the components isn’t apparent in the headline which, at 2.2 percent annualized growth, hits Econoday’s second-estimate consensus for first quarter GDP. Nonresidential investment gets a 3.1 percentage point upgrade to a 9.2 percent annualized rate while investment on the residential side gets a 2 point downgrade to a minus 2.0 percent rate.
Inventories increased by $20.2 billion in the quarter, down from $33.1 billion in the first estimate, while net exports totaled minus $650.9 billion vs an initial $645.9 billion. The revisions trim the contribution from inventories to plus 0.13 from an initial plus 0.43 with net exports trimmed to plus 0.08 from plus 0.20.
Consumer spending was downgraded only by 1 tenth, rising at a 1.0 percent rate and reflecting a 3 tenths downward revision to service spending which is at plus 1.8 percent in the second estimate. Government purchases are also downgraded by 1 tenth to plus 1.1 percent.
The upgrade for nonresidential investment reflects greater gains for structures and intellectual property along with equipment which however is lagging the other components. The decline for residential investment underscores what has been and continues to be uneven results for building and home sales.
All in all, it was a strong quarter for business, with investment perhaps getting a boost from this year’s corporate tax cut, and a soft one for the consumer as spending sputtered and residential investment went into reverse. But the early outlook for the second quarter is positive with most forecasts calling for a return to the 3 percent area.
Import and Export Prices
With the strengthening of the dollar, we have seen a very minimal increase in the average cost of imported goods. With the increases “hovering near zero on a month to month basis and barely over zero on a yearly basis. Much of this minimal increase can be seen as a result of the current monthly increase to the price of imported iron and steel mill products right around 4%.
This near zero increase in import prices comes in stark contrast to the increases to the US’s export prices. Even with extremely sluggish prices of agricultural goods, year on year overall export prices are up 3.8%. These increases in export prices in comparison to imports are a good indicator of an overall increase in wealth in the hands of Americans as a whole.
Consensus data predicts for imports to rise 0.5% in cost in the month of April, while export prices rising at 0.3%.
Jobless Claims May 2018
Initial jobless claims came in at 211,000 in the April 28 week, only 2,000 higher from the prior week’s 209,000 which remains a 49-year low. The latest 4-week average, down a very sizable 7,750 to 221,500, is a 45-year low. Continuing claims fell 77,000 in lagging data for the April 21 week to 1.756 million which, for this reading, is also a 45-year low. And the unemployment rate for insured employees is down another notch, 1 tenth lower to only 1.2 percent.
Trends for this series are once again moving lower, consistent with strong demand for labor in results that will firm expectations for strength in tomorrow’s employment report for April.