GDP Dropped at a 6.1% Annual Rate; Final Sales Down c.3.3%

The GDP numbers are out for the first quarter. The Commerce Department's Bureau of Economic Analysis announced GDP declined at a 6.1 percent seasonally annual rate. The acceleration of the decline in inventories knocked 2.8 percentage points off of that annualized growth rate. Final Sales declined at a 3.3 percent seasonally annual rate.

Declines in investment spending accounted for more than the total decline in GDP.

Prices, as measured by the GDP price deflator, rose 2.9 percent (2.0 percent without food and energy.) Inflation is not dead.

On the bright side, such a massive inventory fall should be self correcting to some degree. Import declines more than offset the small fall in exports. Net exports on net contributed back almost two percentage points to the negative growth rate in GDP.

The decline in GDP was worse than the 5.0 percent consensus expectation.

Yes, I am sticking with my prediction thet the U.S. economy hit its trough in March. The magnitude of the inventory correction is in line with my scenario.