Daily News: April 30, 2015

Economy Stalled in Q1, Odds against June Rate Increase


According to the “advance” estimate released by the Bureau of Economic Analysis (BEA), real gross domestic product increased at an annual rate of 0.2% in Q1/15. In Q4/14, GDP increased 2.2%.

The BEA emphasized that the first-quarter advance estimate is based on source data that are incomplete or subject to further revision by the source agency. The “second” estimate for the Q1, based on more complete data, will be released on May 29, 2015.

According to some press reports, the fresh data made it more likely that the Fed will maintain plans to raise interest rates on pause for a little longer to be sure the downturn was an aberration and that the economy will resume solid growth in the current quarter.

RTT News said, according to Rob Carnell, chief international economist at ING, the Fed will have to take the outlook for future growth into account when discussing the timing of the first interest rate hike. “We think the Fed will have to give the economy the benefit of the doubt, and as such, it will be hard for them to categorically rule out a June hike, even though the odds are currently stacked against one,”, Carnell said according to RTT.

Real nonresidential fixed investment decreased 3.4% in the first quarter, in contrast to an increase of 4.7% in the fourth. Investment in nonresidential structures decreased 23.1%, in contrast to an increase of 5.9%. Investment in equipment increased 0.1%, compared with an increase of 0.6%. Investment in intellectual property products increased 7.8 percent, compared with an increase of 10.3%.

In a related report, the fresh data made it more likely that the Fed will maintain plans to raise interest rates on pause for a little longer to sure the downturn was an aberration and that the economy will resume solid growth in the current quarter

The increase in real GDP in the first quarter primarily reflected positive contributions from personal consumption expenditures (PCE) and private inventory investment that were partly offset by negative contributions from exports, nonresidential fixed investment, and state and local government spending. Imports, which are a subtraction in the calculation of GDP, increased.

To read the entire Link BEA report, click here.

To read the RTT News report, click here.