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In The News:

First Quarter GDP Grows 3.5%


Real gross domestic product -- the output of goods and services produced by labor and property
located in the United States -- increased at an annual rate of 3.5 percent in the first quarter of 2005,
according to preliminary estimates released by the Bureau of Economic Analysis.  In the fourth quarter,
real GDP increased 3.8 percent.


[IMGCAP(1)]


While off from the fourth quarter, the first-quarter numbers are stronger than the prelimary estimate last month of 3.1 percent. The GDP estimates released May 26 are based on more complete source data than were available for
the advance estimates issued last month.  In the advance estimates, the increase in real GDP was 3.1
percent.


The major contributors to the increase in real GDP in the first quarter were personal consumption
expenditures (PCE), private inventory investment, exports, residential fixed investment, and equipment
and software.  Imports, which are a subtraction in the calculation of GDP, increased.
   
The deceleration in real GDP growth in the first quarter primarily reflected decelerations in
equipment and software and in PCE that were partly offset by accelerations in exports, in private
inventory investment, and in residential fixed investment and a deceleration in imports.


Final sales of computers contributed 0.56 percentage point to the first-quarter change in real GDP,
the same contribution as to the fourth-quarter change.  Motor vehicle output contributed 0.23 percentage
point to the first-quarter change in real GDP after contributing 0.86 percentage point to the fourth-
quarter change. 


The price index for gross domestic purchases, which measures prices paid by U.S. residents,
increased 2.9 percent in the first quarter, 0.1 percentage point less than the advance estimate; this index
also increased 2.9 percent in the fourth quarter.  Excluding food and energy prices, the price index for
gross domestic purchases increased 3.0 percent in the first quarter, compared with an increase of 2.0
percent in the fourth.  About 0.2 percentage point of the first-quarter increase in the index was
accounted for by the pay raise for federal civilian and military personnel, which is treated as an increase
in the price index of employee services purchased by the federal government.   


Real personal consumption expenditures increased 3.6 percent in the first quarter, compared with
an increase of 4.2 percent in the fourth.  Real nonresidential fixed investment increased 3.5 percent,
compared with an increase of 14.5 percent.  Nonresidential structures decreased 3.3 percent, in contrast
to an increase of 2.1 percent.  Equipment and software increased 5.6 percent, compared with an increase
of 18.4 percent.  Real residential fixed investment increased 8.8 percent, compared with an increase of
3.4 percent.


Real exports of goods and services increased 7.2 percent in the first quarter, compared with an
increase of 3.2 percent in the fourth.  Real imports of goods and services increased 9.1 percent,
compared with an increase of 11.4 percent.


Real federal government consumption expenditures and gross investment increased 0.4 percent in
the first quarter, compared with an increase of 1.2 percent in the fourth.  National defense increased 0.3
percent, in contrast to a decrease of 0.6 percent.  Nondefense increased 0.7 percent, compared with an
increase of 5.3 percent.  Real state and local government consumption expenditures and gross
investment decreased 0.5 percent, in contrast to an increase of 0.6 percent.


The real change in private inventories added 0.78 percentage point to the first-quarter change in
real GDP, after adding 0.46 percentage point to the fourth-quarter change.  Private

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