MNI DATA ANALYSIS: US 1Q GDP +2.3% Vs +2.0% Expected>

--ECI +0.8% Vs +0.7% Expected; +2.7% Y/Y vs +2.6% Y/Y 4Q

--GDP Price Index +2.0% Vs +2.4% Expected, +2.3% In 4Q

--Core PCE Price Index +2.5% Vs +1.9% 4Q; +1.7% Y/Y Vs +1.5% Y/Y 4Q

By Kevin Kastner and Sara Haire

     WASHINGTON (MNI) - First quarter GDP rose 2.3% in the advance 

estimate, marginally faster than the 2.0% pace expected, but softer than 

some market participants expected, with the slowdown pinned to weaker 

PCE growth offset by rising inventories, data released Friday by the 

Bureau of Economic Analysis showed. 

     Combined with a larger-than-expected 0.8% rise in the Employment 

Cost Index, released by the Bureau of Labor Statistics at the same time, 

the picture is of a quarter that saw moderately slower growth, but some 

pick up in consumer compensation and price inflation.

--CORE PRICE MEASURE UP

     The core PCE price index rose 2.5% in the first quarter after a 

1.9% increase in the fourth quarter, posting the strongest gain in seven 

years. On a year/year basis, first quarter core PCE prices were up 1.7% 

after ticking up to a 1.5% year/year rise in the fourth quarter, and now 

sit slightly below the year/year rates seen in late-2016 and 

early-2017. 

     The overall GDP price index was up 2.0% in the first quarter, 

slower than the 2.4% rate expected, after a 2.3% pace of growth for the 

fourth quarter. 

--PCE SOFTER, INVENTORIES REBOUND

     PCE was up 1.1% in the first quarter after a 4.0% rise in the 

fourth quarter, with retail sales data early in the quarter pointing to 

a slowdown. The softer pace reflected an outright decline in goods PCE 

growth and slower, but still solid, gain in services PCE. 

     Inventories were up $33.1 billion in the first quarter after a 

$15.6 billion rise in the fourth quarter, offsetting some of the 

weakness in other categories. When the inventory component is removed, 

real final sales were up only 1.9% after a 3.4% gain in the fourth 

quarter. 

     The net export gap narrowed modestly to $645.9 billion for the 

first quarter after widening to $653.9 billion in the fourth quarter, 

adding to the headline number. Final sales to domestic purchases rose 

only 1.6% after a 4.5% gain in the previous quarter. 

     Nonresidential fixed investment rose by 6.1% in the first quarter, 

down from a 6.8% gain in the fourth quarter, due in large part to a 

slowdown in equipment growth. Residential fixed investment was flat in 

the first quarter after a 12.8% surge in the fourth quarter. 

     Government spending rose 1.2% in the first quarter after a 3.0% 

rise in the fourth quarter. Federal government spending was up 1.7%, 

while state and local government spending was up 0.8%, but significantly 

slower than in the previous quarter. 

-- ECI GROWTH FASTER

     Also released Friday, the Employment Cost Index accelerated in the 

first quarter to a 0.8% pace, above the expected 0.7% gain. The first 

quarter gain followed a 0.6% pace in the previous quarter. Private 

industry compensation accelerated to a 1.0% pace, doubling its fourth 

quarter rate, while state and local government compensation growth 

slowed to 0.4%.

     The year-over-year rate for ECI rose to 2.7% from 2.6% in the 

previous quarter and was well ahead of the 2.4% rate in the first 

quarter of 2017. 

     Wages and salaries rose 0.9% in the first quarter following a 0.5% 

gain in the previous quarter, and were up 2.7% from a year ago after a 

2.5% year/year gain in the fourth quarter. 

     Benefits growth rose to a 0.7% pace for the quarter from a 0.5% 

rise in the previous quarter. Benefits were up 2.6% from the same 

quarter a year ago after a 2.5% year/year gain in the fourth quarter. 

     ** MNI Washington Bureau: 202-371-2121 ** 

[TOPICS: MAUDS$,M$U$$$,MAUDR$]