Growth in the first quarter smashed expectations, fueled in part by strong inventory building. According to the government, $32 billion of goods were added to inventories this quarter, or $128 billion annualized.
This stockpiling of goods boosted first-quarter GDP growth by about 70 basis points and helped propel growth to a 3.2% annual rate, well above forecasts.
The problem is that it is not at all obvious where these inventories came from. Goods have to come from somewhere, either produced by domestic firms or imported from abroad.
The mystery is that both production and imports fell in the first three months of the year, according to government data.
"You can't stockpile what you do not import or do not produce," said Robert Brusca, chief economist at FAO Economics.
The Fed reported last week that industrial output slipped at a 0.3% annual rate in the first quarter.