The Wall Street Journal reports, "consumer spending accounts for more than two-thirds of U.S. economic output, and it rose at a seasonally adjusted annual rate of 3.3% in the fourth quarter. It slowed in the first quarter, but not much, growing at a 3% pace. Spending on goods slowed to a 0.4% pace, but spending on services – like health care and energy – rose to a 4.4% pace. Personal consumption expenditures were the single biggest boost to economic output in the first three months of the year, and helped offset big drags on growth like trade.
Spending by businesses was another story. Fixed nonresidential investment fell at a 2.1% rate in the first quarter after surging 7.3% in 2012 and rising a more modest 2.7% in 2013. Spending on equipment fell at an annual pace of 5.5% in the first quarter of 2014, the worst drop since the second quarter of 2009, after rising at a 10.9% pace in the fourth quarter of 2013.
Net trade subtracted 0.83 percentage point from GDP growth in the first quarter as exports lagged and the trade gap widened. Exports fell at a 7.6% pace, the most since the recession ended in 2009. Trade had been a big boost to economic output in the second half of 2013, contributing 0.14 percentage point in the third quarter and 0.99 percentage point in the fourth quarter. Stay tuned, though: Trade data from March will be released by the Commerce Department next Tuesday, which could lead to significant revisions in GDP.
The U.S. housing recovery’s slowdown was a drag on GDP in the first quarter. Residential fixed investment — spending on home building and improvements — pulled down GDP growth to the tune of 0.18 percentage point in the first quarter after contributing 0.33 percentage point to GDP growth for all of last year.
A big buildup in private inventories helped boost economic output in the third quarter last year to a 4.1% annual rate. In the first quarter of 2014, by contrast, slowing inventories subtracted 0.57 percentage point from GDP growth. A measure of GDP that strips out inventory changes, final sales of domestic product, grew at a 0.7% pace in the first quarter, down from its 2.7% pace in the fourth quarter.
