Less than an hour ago we speculated that "it wouldn't be surprising for GDP to come substantially weaker than expected, only to be revised higher (or lower) subsequently." Sure enough, we have gotten at least the first part right for now, with the advance Q1 GDP number printing a very disappointing 2.5%, on expectations of a 3.0% increase, up from 0.4% in Q4, and the biggest miss since Q3 2011. The reason for the big miss: Inventory and Fixed Investment came well below expectations, comprising 1.03% (of which autos represented 0.24%) and 0.53% of the 2.5% annualized increase GDP. Kiss the great CapEx investment story goodbye.
The only silver lining in today's otherwise very weak report: Personal Consumption Expenditures, which were a sizable 3.2% versus the 2.8% expected, and amounted to 2.24% or virtually all of the net Q1 GDP growth. So far so good .The bad news, however, is that this number will not sustain into Q2 and look for expenditures to plunge in the coming quarter. Finally, let's not forget that it rained like 5 days in March, so there's that. And of course, very soon, all GDP will be revised to add intangibles, so in retrospect Q1 GDP will likely have grown by a Ministry of Truth blush-inducing 10% or so.
And for those confused why the spending spree led "recovery" won't last, the answer is simple: the US consumer is out of money, as can be seen by this savings (or lack thereof) rate chart.