by Calculated Risk on 4/28/2022 12:22:00 PM
Earlier from the BEA: Gross Domestic Product, Fourth Quarter and Year 2021 (Advance Estimate)
The decrease in real GDP reflected decreases in private inventory investment, exports, federal government spending, and state and local government spending, while imports, which are a subtraction in the calculation of GDP, increased. Personal consumption expenditures (PCE), nonresidential fixed investment, and residential fixed investment increased.
The advance Q1 GDP report, at -1.4% annualized, was below expectations, primarily due to a negative impact from trade and a decrease in inventories.
Personal consumption expenditures (PCE) increased at a 2.7% annualized rate in Q1.
The graph below shows the contribution to GDP from residential investment, equipment and software, and nonresidential structures (3 quarter trailing average). This is important to follow because residential investment tends to lead the economy, equipment and software is generally coincident, and nonresidential structure investment trails the economy.
In the graph, red is residential, green is equipment and software, and blue is investment in non-residential structures. So, the usual pattern – both into and out of recessions is – red, green, blue.
Of course – with the sudden economic stop due to COVID-19 – the usual pattern didn’t apply.
The dashed gray line is the contribution from the change in private inventories.
Click on graph for larger image.
Residential investment (RI) increased at a 2.1% annual rate in Q1. Equipment investment increased at a 15.3% annual rate, and investment in non-residential structures increased at a 9.2% annual rate.
On a 3-quarter trailing average basis, RI (red) is unchanged, equipment (green) is up, and nonresidential structures (blue) is still down.
The second graph shows residential investment as a percent of GDP.
Residential Investment as a percent of GDP increased in Q1.
I’ll break down Residential Investment into components after the GDP details are
Note: Residential investment (RI) includes new single-family structures,
multifamily structures, home improvement, broker’s commissions, and a few minor
The third graph shows non-residential investment in
structures, equipment and “intellectual property products”.