Friday, April 29, 2016

Behind the GDP Figure

Why was economic growth so slow in the first quarter? Here are three answers:

Business investment posted its worst performance since the tail end of the last recession. Fixed nonresidential investment - mostly commercial real estate - declined at a 5.9 percent pace in the first quarter, the sharpest drop since the second quarter of 2009. Spending on equipment dropped 8.6 percent and spending on structures fell 10.7 percent.

Consumer spending continued to decelerate in the first three months of 2016, rising at a 1.9 percent pace compared with 2.4 percent in the fourth quarter. Spending on goods stalled, rising just 0.1 percent.

Foreign trade continued to be a headwind: Net exports subtracted 0.34 percentage point from the first quarter’s growth rate, the seventh time in the past nine quarters that trade was a drag on overall GDP growth. The trade gap widened as exports dropped 2.6 percent from the fourth quarter.

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