US Economic Growth Slowing, Not Plunging

- Advance 1Q GDP rose 3.1% versus estimates of a 3.5% increase and a 3.8% gain in 4Q.
- Advance 1Q Personal Consumption rose 3.5% versus estimates of a 3.2% increase and a 4.2% gain in 4Q.
- Advance 1Q GDP Price Deflator rose 3.2% versus estimates of a 2.1% increase and a 2.3% gain in 4Q.
- Initial Jobless Claims for last week rose to 320K versus estimates of 320K and 299K the prior week.
- Continuing Claims fell to 2555K versus estimates of 2644K and 2631K prior.

Bottom Line: The GDP report showed business spending on equipment and software rose at the slowest pace in 2 years and inventories increased by the most since the second quarter of 2000. This leads me to believe economic growth began to slow to below-average levels in March. The fact that the GDP deflator only rose 3.2% when commodities were near all-time highs is a positive. The deflator has risen around this rate 4 other times just since 2000. It rose 3.6% in March 2000. The trade deficit also pressured GDP as oil imports soared. I continue to believe declining commodity prices will help boost GDP growth in the second half of the year. I want to reiterate that I believe economic growth is slowing, not plunging. Recent housing data show booming sales and low supply, which should boost housing starts over the coming months. Moreover, personal consumption beat estimates and also illustrates the continuing strength of the consumer.