May 26, 2017

1Q17 Gross Domestic Product, Second Estimate (052617): An Annualized 1.2 Percent, Revised Up from 0.7 Percent

Filed under: Economy,Taxes & Government — Tom @ 8:29 am

Predictions:

The report will be here at 8:30.

HERE IT IS (full text release with all tables) — Surprise, surprise (not really; readers of my post a month ago may recall that I saw this coming):

Real gross domestic product (GDP) increased at an annual rate of 1.2 percent in the first quarter of 2017 (table 1), according to the “second” estimate released by the Bureau of Economic Analysis. In the fourth quarter, real GDP increased 2.1 percent.

The GDP estimate released today is based on more complete source data than were available for the “advance” estimate issued last month. In the advance estimate, the increase in real GDP was 0.7 percent. With this second estimate for the first quarter, the general picture of economic growth remains the same; increases in nonresidential fixed investment and in personal consumption expenditures (PCE) were larger and the decrease in state and local government spending was smaller than previously estimated. These revisions were partly offset by a larger decrease in private inventory investment.

Real gross domestic income (GDI) increased 0.9 percent in the first quarter, in contrast to a decrease of 1.4 percent (revised) in the fourth. The average of real GDP and real GDI, a supplemental measure of U.S. economic activity that equally weights GDP and GDI, increased 1.0 percent in the first quarter, compared with an increase of 0.3 percent in the fourth quarter.

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

The deceleration in real GDP in the first quarter primarily reflected a downturn in private inventory investment and a deceleration in PCE that were partly offset by an upturn in exports and an acceleration in nonresidential fixed investment.

Current-dollar GDP increased 3.4 percent, or $158.2 billion, in the first quarter to a level of $19,027.6 billion. In the fourth quarter, current-dollar GDP increased 4.2 percent, or $194.1 billion.

The price index for gross domestic purchases increased 2.6 percent in the first quarter, compared with an increase of 2.0 percent in the fourth quarter (table 4). The PCE price index increased 2.4 percent, compared with an increase of 2.0 percent. Excluding food and energy prices, the PCE price index increased 2.1 percent, compared with an increase of 1.3 percent.

A month ago, I said that “I’d guess that future revisions are going to take this number up.” The “this number” reference was to personal consumption expenditures, which increased from contributing .23 points to GDP originally to 0.44 points in today’s release, accounting for about 40 percent of the 0.5-point upward revision.

The updated contributions to GDP table will appear shortly.

UPDATE: Here it is —

GDPcomponentsThru1Q17at052617

The notables (to me) are highlighted.

I believe the revisions with the services element of personal consumption are to things that represent recognizable standard of living improvements, as opposed to health care (and health insurance within “other services,” which for the most part don’t).

Also, the fixed investment uptick is good news for future productivity and GDP improvements.

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