US GDP Slows in Q1 2023 Despite Consumer and Government Spending Boost

GDP Hightlights

• GDP grew by 1.1% in Q1 2023, down from 2.6% in the previous quarter
• Increases in consumer spending, exports, and government spending drove growth
• Declines in private inventory investment and residential fixed investment were partially offsetting factors

GDP Overview

According to the Bureau of Economic Analysis, the “advance” estimate shows that real GDP increased at an annual rate of 1.1 percent in the first quarter of 2023, down from 2.6 percent in the fourth quarter.

The increase in real GDP was due to rises in consumer spending, exports, federal government spending, state and local government spending, and nonresidential fixed investment, which were partly offset by declines in private inventory investment and residential fixed investment.

However, imports increased and were subtracted from the calculation of GDP.

The increase in consumer spending was seen in both goods and services, with motor vehicles and parts leading in goods, and health care and food services and accommodations leading in services. In exports, the increase in goods (led by consumer goods, except food and automotive) was partly offset by a decrease in services (led by transport).

The increase in federal government spending was led by nondefense spending, while the increase in state and local government spending reflected an increase in compensation of employees. Nonresidential fixed investment saw increases in structures and intellectual property products, partly offset by a decrease in equipment.

US Private Inventory and Residential Investment Declines in Q1 2023

The decrease in private inventory investment was due to a downturn in wholesale trade and manufacturing, while the decrease in residential fixed investment was led by new single-family construction. Imports turned up compared to the previous quarter.

US Q1 2023 Current GDP: $26.47 Trillion, Up 5.1% with Rising Prices

Current dollar GDP increased by 5.1 percent at an annual rate, reaching $26.47 trillion in the first quarter, up from $414.1 billion in the fourth quarter.

The price index for gross domestic purchases increased 3.8 percent in the first quarter, compared with an increase of 3.6 percent in the fourth quarter.

The PCE price index increased 4.2 percent, while the PCE price index excluding food and energy prices increased by 4.9 percent.

US Personal Income and Saving Increase in Q1 2023

In terms of personal income, current-dollar personal income increased by $278.9 billion in the first quarter, primarily due to increases in compensation and government social benefits.

Disposable personal income increased by $571.2 billion, or 12.5 percent, reflecting an increase in personal income and a decrease in personal current taxes.

Real disposable personal income increased 8.0 percent in the first quarter. Personal saving was $946.2 billion in the first quarter, with a personal saving rate of 4.8 percent, up from 4.0 percent in the previous quarter.