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GDP Up Only 1% in First Quarter

WASHINGTON (MNI) - Advance first quarter U.S. GDP data show very little economic expansion, with a deceleration in activity that reflected larger drags from exports, nonresidential fixed investment and a larger decrease in inventory investment.

The report by the Bureau of Economic Analysis showed Q1 GDP was +0.1%, nowhere near the 1.1% growth expected in an MNI survey of economists, and compared to +2.6% in Q4.

Real final sales were +0.7% from +2.7%, underscoring the weakness in the report. Chain Price Index +1.3% vs +1.6% Q4.

The slowdown in economic activity can be traced to down exports (-7.6%), nonresidential fixed investment (-2.8%), while the change in private inventories subtracted 0.6 percentage points from economic activity.

There was also a deceleration in consumer spending, with PCE +3.0% vs +3.3% in Q4 2013.

Government spending and residential investment were again subtractions from GDP but not as large as the previous quarter. The downturn in state and local government spending (-1.3%) was offset by 0.7% rise in federal government investment and a downturn in imports (-1.6%).

The advance Q1 results, while worse than expected, indicate a significant slowdown in growth but much of that decline was due to a harsh winter. Analysts are optimistic that there will be a strongrebound in Q2, with momentum building into the rest of 2014.

Components, Q1 Adv Est vs Q4:13 Final Estimate

GDP +0.1% +2.6%

Final Sales 0.7 2.7

PCE 3.0 3.3

S&L spending -1.3 0.0

Non Res Fixed Inv -2.1 5.7

Residtnl Inv -5.7 -7.9

Net Exprt Contrib cut 0.83 add 0.99

Inventory Contrib cut 0.57 cut 0.02

** MNI Washington Bureau: Tel. (202) 371-2121 **

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