Implications: Real GDP growth was unrevised at a 1.8% annual growth rate in Q1. This was less than the consensus expected but almost exactly what First Trust was forecasting. As a result, it does not change our view of where the economy is heading. We anticipate faster economic growth for the remainder of the year, particularly in the second half. The "news" in today's report is the first glimpse of economy-wide corporate profits and those hit a new record high in Q1, up at a 5.3% annual rate and up 8.5% versus a year ago. The profits of domestic financial firms fell in Q1 but profit gains for non-financials and the rest of the world offset that decline. On the inflation front, GDP prices increased at a 1.9% annual rate in Q1. That's inflation for the things we produce. However, inflation for gross domestic purchases, the things we buy, was running at a 3.8% annual rate. In the past year, nominal GDP – real GDP growth plus GDP price inflation – is up at a 3.9% annual rate. With nominal GDP growing at this rate, the Federal Reserve should no longer be holding short-term interest rates near zero. In other news this morning, new claims for unemployment insurance increased 10,000 last week to 424,000. Continuing claims for regular state benefits declined 46,000 to 3.69 million.
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