First Quarter GDP Revised Higher To 0.8%, Misses Expectations

Following the terrible initial Q1 GDP print of 0.5% released one month ago, there was some hope that following some subsequent favorable inventory and trade data, the number would be revised substantially higher, with the whisper estimate rising as high as 1% or more, above the consensus estimate of 0.9%. Moments ago the BEA reported that in its first revision of Q1 growth, the US economy grew at only 0.8% annualized, a modest rebound from the original GDP report, however still missing consensus estimates.


On a real basis, GDP rose 2.0%, the same as last quarter, and the lowest annual rate of increase since Q1 2014.

Looking at the components, there was virtually no improvement in the all important personal consumption print, it remained unchanged, rising at 1.9% Q/Q, while core personal spending category, which rose 2.1%, in line with expectations. Consumption contributed 1.29% of the total 0.82% GDP print, virtually unchanged from the 1.27% annualized contribution reported a month ago.

Fixed investment likewise did not provide any material bounce either, subtracting 0.25% from the bottom line print, practically unchanged from last month's -0.27%.

Where there was improvement was in private inventories, which subtracted a more modest -0.20% from GDP growth, better than tha -0.33% originally expected.

Also contributing was net trade, which picked up modestly as well, if still negative, subtracting -0.22% from the annualized GDP print, an improvement on the -0.33% reported originally.

Government consumption was unchanged, and added 0.2% to the final print.

The full breakdown by component is charted below:

Overall, a report with little surprises.  What was, however, curious, is that in a quarter in which corporate profits imploded, the BEA reported that profits from current production (corporate profits with inventory valuation adjustment (IVA) and capital consumption adjustment (CCAdj)) increased $6.5 billion in the first quarter, a 0.3% increase. This compares to a decrease of $159.6 billion in the fourth, or a 7.8% plunge.

Broken down, any weakness the BEa saw was in the banks, which saw profits drop 0.5% after sliding 6% in Q4:

  • Profits of domestic financial corporations decreased $2.0 billion in the first quarter, compared with a decrease of $24.0 billion in the fourth.
  • Profits of domestic nonfinancial corporations increased $45.7 billion, in contrast to a decrease of $129.2 billion. The rest-of-the-world component of profits decreased $37.3 billion, compared with a decrease of $6.5 billion. This measure is calculated as the difference between receipts from the rest of the world and payments to the rest of the world. In the first quarter, receipts decreased $3.5 billion, and payments increased $33.8 billion.

In summary, a report of little significance, and one which will not provide much clarity on the direction of the US economy, at least until the Q2 GDP print which, however, will not come until late July, and after the July FOMC meeting, which means the Fed will be flying blind if it is indeed set on hiking rates in June or July.