GDP Growth and Inventory Investment – Payback Time

The Bureau of Economic Analysis (BEA) released the second estimate of real GDP growth for the first quarter of 2014. The second estimate is based on more complete data than is available for the advance estimate. Real GDP contracted at a 1.0% seasonally adjusted annual rate, a sharper slowdown than originally estimated (initially +0.1% growth). Growth in the fourth quarter was 2.6%.

The downward revision was almost entirely concentrated in private inventory investment, shaving 1.62 percentage points from GDP growth, down from 0.57 points in the initial estimate. The other major components of GDP were largely unchanged.

The payback from inventory investment has been looming since surging in the second half of last year. The hit to growth this quarter sets the stage for more stable growth going forward.

We expect growth to strengthen through the rest of the year as well as into 2015. With the correction to inventory investment out of the way and the harsh winter behind us second quarter growth should rebound and provide a much better read on the economy’s underlying strength.

 

3 Responses to GDP Growth and Inventory Investment – Payback Time

  1. […] took a toll on housing and economic activity. According to the Bureau of Economic of Analysis, real GDP contracted at a 1% seasonally adjusted annual rate during the first quarter. Growth would have been slightly positive absent a decline in business inventory investment. […]

  2. […] took a toll on housing and economic activity. According to the Bureau of Economic of Analysis, real GDP contracted at a 1% seasonally adjusted annual rate during the first quarter. Growth would have been slightly positive absent a decline in business inventory investment. […]

  3. […] took a toll on housing and economic activity. According to the Bureau of Economic of Analysis, real GDP contracted at a 1 percent seasonally adjusted annual rate during the first quarter. Growth would have been slightly positive absent a decline in business inventory investment. […]

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