Disappointing GDP Report Shows Nonresidential Fixed Investment Declines 2.1 Percent

Nonresidential fixed investment decreased 2.1 percent and residential fixed investment fell 5.7 percent during the first quarter, according to an April 30 release by the Bureau of Economic Analysis. Overall, real gross domestic product (GDP) expanded just 0.1 percent (seasonally adjusted annual rate) during the first quarter of 2014 following a 2.6 percent increase in the fourth quarter of last year. 

“While today’s GDP report was disappointing, economists knew the U.S. economy was significantly impacted during the year’s initial three months by harsh meteorological conditions as well as by diminished inventory investments from retailers,” said Associated Builders and Contractors Chief Economist Anirban Basu. “Construction activities, which are heavily sensitive to atmospheric conditions, were slowed during the first quarter along with the movement of goods, which, among other things, impacted U.S. exports.

“Most economists seem to agree that activity will pick up significantly during the second quarter both for the U.S. construction industry and for the broader economy,” said Basu. “Recent data regarding the labor markets indicate that, if anything, the pace of private sector hiring is accelerating, which is consistent with ongoing economic expansion.”

The following segments expanded during the first quarter and/or contributed to GDP:
  • Personal consumption expenditures added 3 percent to GDP after contributing 3.3 percent in the fourth quarter of 2013.
  • Spending on goods increased 0.4 percent.
  • Personal consumption expenditures contributed 2.04 percent to GDP in the first quarter after contributing 2.22 percent in the fourth quarter of 2013.
  • Real final sales of domestically produced output – minus changes in private inventories – increased 0.7 percent for the quarter after a 2.7 percent increase in the fourth quarter of 2013.Federal government spending expanded 0.7 percent in the first quarter following a 2.7 percent decrease in the prior quarter.
  • Nondefense spending expanded 5.9 percent after decreasing by 10 percent in the previous quarter.
A number of key segments did not experience growth for the quarter:
  • National defense spending declined 2.4 percent after falling 14.4 percent in the fourth quarter of 2013.
  • State and local government spending fell 1.3 percent during the first quarter after remaining flat in the final quarter of 2013.