Unimpressive GDP Numbers

From today’s BEA release of the advance estimates of first quarter GDP growth:

Real gross domestic product — the output of goods and services produced by labor and property located in the United States — increased at an annual rate of 4.2 percent in the first quarter of 2004, according to advance estimates released by the Bureau of Economic Analysis. In the fourth quarter [of 2003], real GDP increased 4.1 percent.

…The slight acceleration in real GDP growth in the first quarter primarily reflected a deceleration in imports, an upturn in government spending, and an acceleration in PCE that were largely offset by decelerations in exports, in inventory investment, and in residential fixed investment.

The price index for gross domestic purchases, which measures prices paid by U.S. residents, increased 3.2 percent in the first quarter, compared with an increase of 1.3 percent in the fourth. Excluding food and energy prices, the price index for gross domestic purchases increased 2.3 percent in the first quarter, compared with an increase of 1.5 percent in the fourth.

This is a solid number, but nothing that will wow anyone — and it’s certainly not as impressive as a lot of people thought it would be. At first glance, one of the more surprising bits about it is the relatively fast rate of inflation included in the report: core inflation accelerated to a 2.3% annual rate, which strikes me as an unexpectedly large increase in inflation.

More on this report later.