Earlier today, the Commerce Department released its advance estimate of first-quarter 2004 gross domestic product. Commerce reported that real GDP expanded at an annual rate of 4.2% during the quarter, only marginally higher than the 4.1% rate reported in its final estimate of fourth-quarter 2003 GDP, released on 3/25.
The three-month period ended March was the 10th consecutive quarter of reported real growth, but the Commerce Department's 4.2% advance estimate came in noticeably below the consensus forecast, which was for growth at around a 5.0% rate.
In comparing the advance first-quarter numbers with the Commerce Department's final estimate for last year's fourth quarter, real GDP was up $108.5 billion or about 1.023%. Add one, then raise this to the fourth power, and you get the rounded annual rate of change of 4.2%.
Versus 2003's first quarter, real GDP was up $498.2 billion, or 4.9%. The respective numbers: 1Q2004 = $10708.6 billion; 1Q2003 = $10210.4 billion.
All primary categories added to growth in this year's first quarter versus last year's fourth. In order of their dollar contribution, they were: (1) personal consumption expenditures ($69.4 billion), (2) nonresidential fixed investment (capital spending, $20.4 billion), (3) government spending ($9.6 billion), (4) inventory change ($6.3 billion). (5) residential fixed investment (housing, $2.7 billion) and (6) net exports ($0.6 billion, by virtue of reported shrinkage in the deficit from $515.2 billion to $514.6 billion.)
A few items of additional interest:
(1) Government spending at the state and local level fell at a 2.6% annual rate, or $7.8 billion.
(2) A $17.4 billion increase in federal spending (10.1% annual rate) more than offset the dip at the state and local level. However, essentially all of the increase in federal outlays came from defense spending, which rose $17.0 billion or at a 15.1% rate during the quarter.
(3) Today's report indicated a sizable increase in key GDP inflation measures. The deflators used for overall GDP and for personal consumption expenditures came in at respective rates of 2.5% and 3.2%, up from 1.5% and 1.0% during last year's fourth quarter
(4) Elsewhere today, the Labor Department reported a large gain during the March quarter in its Employment Cost Index. I believe this, along with the up-tick in inflation in evidence in the GDP report, keep very much alive concerns I expressed a few months ago about the possibility of some "stagflation" during 2004.
The following table breaks out in greater detail the numbers discussed above.
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ADVANCE ESTIMATE OF FIRST-QUARTER 2004
REAL GROSS DOMESTIC PRODUCT (Released
04/29 -- Billions of 2000 Chained Dollars
at Seasonally Adjusted Annual Rates)
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1Q2004 4Q2003 Change/
Advance Final Impact
------------------------
Real GDP 10708.6 10600.1 4.2%
Inventory Change 15.3 9.0 $6.3
Real Final Sales 10687.8 10586.4 3.9%
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Components of GDP
-----------------
Personal Consumption 7555.6 7486.2 3.8%
Nonres. Fixed Investment* 1189.8 1169.4 7.2%
Resid. Fixed Investment 529.3 526.6 2.1%
Net Exports -514.6 -515.2 $0.6
Government Purchases* 1920.3 1910.7 2.0%
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Implicit Price Deflators:
Gross Domestic Product 2.5% 1.5% --
Gross Domestic Purchases 3.2% 1.0% --
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*MEMO ITEMS
-----------
Government Purchases
--------------------
Total 1920.3 1910.7 2.0%
State & Local 1188.1 1195.9 -2.6%
Federal 732.9 715.5 10.1%
National Defense 491.7 474.7 15.1%
Nonresidential
Fixed Investment
----------------
Total 1189.8 1169.4 7.2%
Structures 232.9 236.9 -6.6%
Equipment & Software 965.5 939.7 11.4%
Info. Processing
Equip. & Software 580.9 559.5 16.2%
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MAJOR GDP COMPONENTS -- CHANGES BETWEEN
"ADVANCE" 1Q2004 AND "FINAL" 4Q2003 ESTIMATES
(Billions of 2000 Chained Dollars at
Seasonally Adjusted Annual Rates)
---------------------------------------------------
1Q2004 4Q2003
Advance Final Change
----------------------------
Real GDP 10708.6 10600.1 108.5
Inventory Change 15.3 9.0 6.3
Real Final Sales 10687.8 10586.4 101.4
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Personal Consumption 7555.6 7486.2 69.4
Nones. Fixed Invest. 1189.8 1169.4 20.4
Resid. Fixed Invest. 529.3 526.6 2.7
Net Exports -514.6 -515.2 0.6
Govt. Purchases 1920.3 1910.7 9.6
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REAL GROSS DOMESTIC PRODUCT (SEASONALLY
ADJUSTED ANNUAL RATES, 2000 CHAINED DOLLARS)
Year Q1 Q2 Q3 Q4
----------------------------------------
2004 4.2% -- -- --
2003 2.0% 3.1% 8.2% 4.1%
2002 4.7% 1.9% 3.4% 1.3%
2001 -0.2% -0.6% -1.3% 2.0%
2000 1.0% 6.4% -0.5% 2.1%
1999 3.4% 3.4% 4.8% 7.3%
1998 4.5% 2.7% 4.7% 6.2%
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MEMO ITEM: Annual change in real GDP
before and after the "comprehensive
revision" published by the Commerce
Department on 12/10/03.
----------------------------------------
1929-2002 1959-1992 1992-2002
---------------------------------
After 3.4% 3.4% 3.2%
Before 3.4% 3.4% 3.2%
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