Quarterly GDP growth slowest in two years

WASHINGTON, DC — Real gross domestic product (GDP) expanded only 0.5 percent (seasonally adjusted annual rate) during 2016's first quarter according to an analysis of Bureau of Economic Analysis data released today by Associated Builders and Contractors (ABC). This disappointing figure follows a 1.4 percent annualized rate of economic output expansion during the fourth quarter of 2015.  

Nonresidential fixed investment struggled with a 5.9 percent decline during the year's first three months after falling 2.1 percent during 2015's final quarter. Nonresidential fixed investment in structures fared particularly poorly, declining 10.7 percent during the first quarter on an annualized basis while nonresidential investment in equipment fell 8.6 percent.

"Aside from consumer spending growth, state and local government spending growth and residential building, very little expanded in America during the first three months of 2016," said ABC Chief Economist Anirban Basu. "It is quite conceivable that the current U.S. economic expansion will end before the economy registers a 3 percent or better rate of growth for a single calendar year. The last time the U.S. economy expanded more than 3 percent was in 2005, when the economy expanded 3.4 percent."

"Corporate profitability has been slipping in recent quarters and the mergers and acquisition marketplace has heated up, an unfavorable sign for nonresidential contractors," said Basu. "Many corporate CEOs continue to use available cash to purchase competitors either to gain access to product pipelines, thereby diminishing required product development expenses, or to generate cost savings by eliminating duplicative functions. The result is a lack of business investment generally and a slowing pace of private nonresidential construction spending growth. If it not for an enormous amount of foreign money coming to our shores, private nonresidential construction growth would have been even softer in early 2016. While falling energy-related investment and seasonal factors represent important parts of the story, there are indications of a broader malaise."

The following segments highlight the first quarter GDP release:

• Personal consumption expenditures rose 1.9 percent on an annualized basis during the first quarter of 2016 after growing 2.4 percent during the fourth quarter of 2015.  
• Spending on goods inched 0.1 percent higher during the first quarter after expanding by 1.6 percent during the fourth quarter.
• Real final sales of domestically produced output increased 0.9 percent in the first quarter after rising 1.6 percent in the fourth.
• Federal government spending fell by 1.6 percent in the year's first quarter after expanding 2.3 percent in the fourth quarter of 2015.
• Nondefense spending increased by 1.5 percent in both the first quarter of 2016 and the fourth quarter of 2015.
• National defense spending fell by 3.6 percent in the fourth quarter after registering a 2.8 percent increase in the previous quarter.
• State and local government spending increased by 2.9 percent in the first quarter after falling 1.2 percent during the prior quarter.