1Q2016 Gross Domestic Product: Third (Final) Estimate

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In its third (“final”) estimate of 1Q2016 gross domestic product (GDP), the Bureau of Economic Analysis (BEA) revised growth of the U.S. economy to a seasonally adjusted and annualized rate (SAAR) of +1.08%, up 0.26 percentage point from the second estimate but still lower 4Q2015’s +1.38%. The revised 1Q rate was above consensus expectations of +1.0%. Moreover, 1Q2016’s year-over-year growth rate was +2.08%, not significantly different from 4Q2016’s +1.98%.

Overall, groupings of GDP components show that personal consumption expenditures (PCE), net exports (NetX) and government consumption expenditures (GCE) contributed to 1Q growth. Private domestic investment (PDI) detracted from it.

The most obvious revision was in net exports, which swung from -0.22% to +0.12%. Exports were revised up by $12.3 billion at the same time imports were raised by $4.5 billion. Much of remaining upward revision came from improvements in commercial fixed investments, which were reported to have contracted at only a -0.06% annualized rate -- an improvement of +0.19% from the -0.25% previously reported, but still down slightly from the prior quarter's +0.06% growth rate..

Downward revisions to consumer expenditures partially offset the improvements mentioned above. Consumer spending on services was revised down -0.21%, while consumer spending on goods was trimmed by another -0.06%. In total, annualized consumer spending was reported to be down -0.64% from 4Q2015.

The BEA’s Real Final Sales of Domestic Product, which strips out the impact of inventory fluctuations, improved +0.29% to +1.31%, although that was still down -0.29% from the prior quarter. 

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Consumer Metrics Institute summarized the GDP report as follows:

“Although the BEA's report did break the 1% growth threshold, it still does not record a robustly growing economy. The minor upward revisions posted in this report were arguably not statistically significant. From a larger perspective the past three quarters continue to show a slow-motion slide towards economic stagnation.”

The foregoing comments represent the general economic views and analysis of Delphi Advisors, and are provided solely for the purpose of information, instruction and discourse. They do not constitute a solicitation or recommendation regarding any investment.