Real gross domestic product (GDP) increased at an annual rate of 1.1 percent in the first quarter of 2023 (table 1), according to the “advance” estimate released by the Bureau of Economic Analysis. In the fourth quarter, real GDP increased 2.6 percent.

The increase in real GDP reflected increases in consumer spending, exports, federal government spending, state and local government spending, and nonresidential fixed investment that were partly offset by decreases in private inventory investment and residential fixed investment. Imports, which are a subtraction in the calculation of GDP, increased (table 2). …

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 (table 4). The PCE price index increased 4.2 percent, compared with an increase of 3.7 percent. Excluding food and energy prices, the PCE price index increased 4.9 percent, compared with an increase of 4.4 percent.

[It’s a curious report. The overall real GDP number was 1.1%, but final sales of domestic product were up 3.4%. Consumer spending hit its highest level in nearly two years; overall goods (6.5%) and durable goods were way up (16.9%). The import/export balance was favorable too (2.9/4.8, respectively). The big hit seems to have mainly come in private investments (-12.5%), which is where the Fed was targeting its rate hikes. The implication is that we just burned through a lot of inventory in Q1, but that would be a very large amount of inventory to sell off. Q2 might either be a really rough ride if consumer demand falls off, or inflation may suddenly get worse if it doesn’t. — Ed]