Goldman Sachs: The composition of the GDP report was not as soft as it looked

The fallout from today’s first look at Q1 GDP continues to reverberate with the US dollar stronger and equities weaker because of hot inflation numbers.

Goldman Sachs highlights that the composition of growth wasn’t as soft as the headlines (+1.6% vs +2.4% exp).

“The contribution from inventories (-0.4pp vs. GS +0.2pp) and foreign trade (-0.9pp vs. -0.4pp) accounted for the bulk of the miss,” economists at Goldman write. “Indeed, domestic demand growth proceeded at a strong pace of +2.8% annualized. This reflected a double- digit pace of residential investment growth (+13.9%) and solid growth in consumption (+2.5%) and business fixed investment (+2.9%), the latter reflecting gains in two of the three capex subcategories (equipment +2.1%, intellectual property +5.4%, structures -0.1%).”

Goldman also highlights that government spending slowed more than they expected with federal spending contributing negatively to GDP.

However it was the pricing numbers in the PCE report that caught the market most off guard. The WSJ’s Nick Timiraos calculates that it implies +0.48% core PCE in tomorrow’s report versus the +0.3% consensus. Goldman Sachs doesn’t appear to be convinced as they only boosted their core estimate to +0.33% from 0.30%. That would put core at 2.84% y/y, compared to the 2.7% consensus.

The numbers are due out Friday at 8:30 am ET.

This article was written by Adam Button at