Final 1st Qtr GDP +.7% QoQ Annualized

First quarter real (inflation-adjusted) gross domestic product (GDP) grew at the slowest rate in four years. The +.7% QoQ annualized final revision was lower than the consensus estimate of +.8%, but is still higher than the originally reported estimate of +.6%. Core PCE was unexpectedly revised higher to +2.4% QoQ annualized from +2.2% previously. The GDP price index was also revised up +.2% to 4.2%. Personal consumption was revised lower to 4.2% from 4.4% originally.

Core PCE, which excludes food and energy price increases, was revised higher due to higher medical costs. It is likely that the slight improvement in GDP growth is due to a slightly smaller than expected trade deficit, and slower inventory accumulation than originally projected. Investment fell substantially in the last two quarters versus the first three quarters of 2006. National defense spending also saw a notable slowing in the first quarter.

Profits before tax rebounded in the 1st quarter to +$24B versus a decline of -$16B in the 4th quarter.

Nominal GDP grew 4.9% QoQ annualized in the first quarter, up from +4.1% in the fourth quarter. The dollar value of goods and services produced in the 1st quarter was $13.6 trillion, at an annualized rate. (Note taking 4.9% (nominal GDP) minus 4.2% (GDP inflation rate) = +.7% real GDP growth)