1Q15 GDP, Third Reading: Annualized Contraction of -0.2 Percent, a 0.5 Percent Improvement Over Previous Estimate

Predictions are for a move to a 0.2 percent annualized contraction from the 0.7 percent reported a month ago.

I think it should be larger, but whether it gets reflected is another matter.

The report will be here at 8:30.

HERE IT IS: Predictions were dead-on (full release with tables here) —

Real gross domestic product — the value of the production of goods and services in the United States, adjusted for price changes — decreased at an annual rate of 0.2 percent in the first quarter of 2015, according to the “third” estimate released by the Bureau of Economic Analysis. In the fourth quarter, real GDP increased 2.2 percent.

The GDP estimate released today is based on more complete source data than were available for the “second” estimate issued last month. In the second estimate, the decrease in real GDP was 0.7 percent. With the third estimate for the first quarter, exports decreased less than previously estimated, and personal consumption expenditures (PCE) and imports increased more (see “Revisions” on page 3).

The decrease in real GDP in the first quarter primarily reflected negative contributions from exports, nonresidential fixed investment, and state and local government spending that were partly offset by positive contributions from PCE, private inventory investment, and residential fixed investment. Imports, which are a subtraction in the calculation of GDP, increased.

I’ll have a comparison chart up shortly.

Here it is:

The two most important items are:

• Health care, which is likely a major contributor because of increased out-of-pocket costs consumers are having to swallow (in Obamacare and non-Obamacare plans). Trouble is, this is the component no one really feels enhances their standard of living.
• Imports, which as seen above, went from being a minor to a huge detriment to GDP.

A runner-up is inventories, which increased by more than was estimated a month ago. My view would be that any increase here is going to come off in the second quarter, and then some.

There certainly isn’t any fundamental strength evident in today’s numbers.

The Atlanta Fed’s estimate for the second quarter is currently an annualized 2.1 percent, a figure which has moved up by about 1.3 points during the past three weeks. The estimate as of June 23 appears to take existing home sales data into account but doesn’t mention yesterday’s weak durable goods numbers.

July’s GDP report is going to include revisions to data going back several years, incluing this quarter. It will be quite interesting, especially in light of the spurious claims about “residual seasonality,” whether today’s figure moves back into positive territory, or gets more negative to in my opinion more accurately reflect horribly weak underlying first-quarter data.