Consumer Metrics Institute News Feed
Subscribe to Consumer Metrics Institute News by Email

Consumer Metrics InstituteSM
Home of Daily Consumer Leading Indicators

E-Mail:   
See sample 48-Week Weighted Composite Chart available only to Members:
HomeHistoryAutomotiveEntertainmentFinancialHealthHouseholdHousingRecreationRetailTechnologyTravelFAQsDownloadsMembershipContactAbout

"Bringing the measurements of critical economic activities into the twenty-first century by
mining tracking data for an understanding of what American consumers were doing yesterday."

     
  April 28, 2022 - BEA Reports that First Quarter 2022 GDP Contracted at a -1.43% Rate:

In their first (preliminary) estimate of the US GDP for the first quarter of 2022, the Bureau of Economic Analysis (BEA) reported that the US economy was contracting at a -1.43% annual rate, down 8.33 percentage points (pp) from the prior quarter.

The report documented the US economy quickly transitioning into the early stages of a recession. As expected, the prior quarter's inventory growth disappeared, and the results would have been far worse if the BEA had fully accounted for inflation. Consumer demand for goods slid into contraction while foreign trade subtracted over 3.2pp from the headline.

In an earlier release, annualized household disposable income was reported to be $260 lower than in the prior quarter, and the household savings rate was reported to be 6.6%, down 1.1pp from the prior quarter.

For this estimate the BEA assumed an effective annualized deflator of 8.03%. During the same quarter the inflation recorded by the Bureau of Labor Statistics (BLS) in their CPI-U index was higher at 11.27%. Under estimating inflation results in optimistic growth rates, and if the BEA's nominal data was deflated using CPI-U inflation information the headline growth number would have been -4.79%.

Among the notable items in the report :

-- Consumer spending for goods was reported to be contracting at a -0.03% rate, down 0.31pp from the prior quarter.

-- The contribution to the headline from consumer spending on services was reported to be 1.86%, up 0.38pp from the prior quarter. The combined consumer contribution to the headline number was 1.83%, up 0.07pp from the prior quarter.

-- The headline contribution for commercial/private fixed investments was reported to be 1.27%, up 0.77pp from the prior quarter.

-- Inventories subtracted 0.84% from the headline number, down 6.16pp from the prior quarter. It is important to remember that the BEA's inventory numbers are exceptionally noisy (and susceptible to significant distortions/anomalies caused by commodity pricing or currency swings) while ultimately representing a zero reverting (and long term essentially zero sum) series.

-- The contribution to the headline from governmental spending was reported to be -0.48%, down 0.02pp from the prior quarter.

-- The contribution from exports was reported to be -0.68%, down 2.92pp from the prior quarter.

-- Imports subtracted 2.53% annualized 'growth' from the headline number, down 0.07pp from the prior quarter. Foreign trade contributed a net -3.21pp to the headline number.

-- The annualized growth in the 'real final sales of domestic product' was reported to be -0.59%, down 2.17pp from the prior quarter. This is the BEA's 'bottom line' measurement of the economy (and it excludes the inventory data).

-- As mentioned above, real per-capita annualized disposable income was reported to have decreased by $260 quarter to quarter. The annualized household savings rate was 6.6% (down 1.1pp from the prior quarter). In the 55 quarters since 2Q-2008 the cumulative annualized growth rate for real per-capita disposable income has been 1.28%.



The Numbers

As a quick reminder, the classic definition of the GDP can be summarized with the following equation :

GDP = private consumption + gross private investment + government spending + (exports - imports)


or, as it is commonly expressed in algebraic shorthand :

GDP = C + I + G + (X-M)


In the new report the values for that equation (total dollars, percentage of the total GDP, and contribution to the final percentage growth number) are as follows :

GDP Components Table

Total GDP = C + I + G + (X-M)
Annual $ (trillions) $24.4 = $16.7 + $4.7 + $4.2 + $-1.2
% of GDP 100.00% = 68.51% + 19.12% + 17.20% + -4.83%
Contribution to GDP Growth % -1.43% = 1.83% + 0.43% + -0.48% + -3.21%


The quarter-to-quarter changes in the contributions that various components make to the overall GDP can be best understood from the table below, which breaks out the component contributions in more detail and over time. In the table below we have split the "C" component into goods and services, split the "I" component into fixed investment and inventories, separated exports from imports, added a line for the BEA's "Real Final Sales of Domestic Product" and listed the quarters in columns with the most current to the left :

Quarterly Changes in % Contributions to GDP

Q1-2022 Q4-2021 Q3-2021 Q2-2021 Q1-2021 Q4-2020 Q3-2020 Q2-2020 Q1-2020 Q4-2019 Q3-2019 Q2-2019
Total GDP Growth -1.43% 6.90% 2.30% 6.72% 6.28% 4.54% 33.79% -31.24% -5.13% 1.89% 2.77% 3.22%
Consumer Goods -0.03% 0.28% -2.21% 2.99% 5.69% -0.07% 9.92% -1.89% 0.04% 0.35% 0.99% 1.42%
Consumer Services 1.86% 1.48% 3.57% 4.93% 1.75% 2.34% 15.59% -22.21% -4.83% 0.77% 1.13% 0.95%
Fixed Investment 1.27% 0.50% -0.16% 0.61% 2.25% 2.92% 4.88% -5.63% -0.41% -0.19% 0.54% 1.06%
Inventories -0.84% 5.32% 2.20% -1.26% -2.62% 1.10% 6.84% -4.01% -0.51% -0.99% -0.32% -0.57%
Government -0.48% -0.46% 0.17% -0.36% 0.77% -0.09% -0.19% 0.97% 0.63% 0.52% 0.36% 0.86%
Exports -0.68% 2.24% -0.59% 0.80% -0.30% 2.07% 4.64% -8.34% -1.95% 0.17% -0.08% -0.26%
Imports -2.53% -2.46% -0.68% -0.99% -1.26% -3.73% -7.89% 9.87% 1.90% 1.26% 0.15% -0.24%
Real Final Sales -0.59% 1.58% 0.10% 7.98% 8.90% 3.44% 26.95% -27.23% -4.62% 2.88% 3.09% 3.79%




Summary and Commentary

The key points of this report can be summarized as follows:

-- The report heralds a "sea change" in the state of the US economy, from being barely propped up by pandemic relief packages to something far closer to free fall.

-- This particular report is mostly about domestic household income and retail inventories normalizing. The residual minor growth in consumer spending was funded entirely from reduced savings.

-- Critically, from the perspective of this report, the impact of economic distortions caused by Russia's Ukrainian invasion and Federal Reserve rate hikes (and "quantitative tightening") are merely ominous clouds gathering on the horizon. Those specific shocks are waiting for the next quarter's reports.

-- From the Fed's perspective, "StagFlation" is really bad. But the upcoming "ContractiFlation" is a whole new level of nightmare.

The BEA's "live" reporting on past economic downturns (e.g., 2007-2009) have been plagued by significant lags. Their antiquated methodologies simply cannot accurately capture the state of an economy in rapid transition. It is highly likely that the first and second quarters of 2022 will be far worse in the next several annual revisions.
 
     

Copyright ©2022 The Consumer Metrics Institute, Inc.