1Q2019 Gross Domestic Product: Second Estimate

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In its second estimate of 1Q2019 gross domestic product (GDP), the Bureau of Economic Analysis (BEA) trimmed the growth rate of the U.S. economy to a seasonally adjusted and annualized rate (SAAR) of +3.06% (3.0% expected), down 0.12 percentage point (PP) from the “advance” estimate (“1Qv1”) but +0.89PP from 4Q2018.

All four groupings of GDP components -- personal consumption expenditures (PCE), private domestic investment (PDI), net exports (NetX), and government consumption expenditures (GCE) -- contributed to 1Q growth.

It is difficult to consider the details of this revision as anything more than statistical noise. Consumer spending on both goods and services was confirmed as decelerating from 4Q.

·         Goods: +0.08PP from 1Qv1; -0.76PP from 4Q

·         Services: 0.00 from 1Qv1; -0.16PP from 4Q

Growth rates for fixed investments and inventories were revised marginally lower.

·         Fixed investment: -0.09PP from 1Qv1; -0.36PP from 4Q

·         Inventories: -0.05PP from 1Qv1; +0.49PP from 4Q

Export and import growth rates had minor and largely offsetting revisions.

·         Exports: +0.13PP from 1Qv1; +0.36PP from 4Q

·         Imports: -0.19PP from 1Qv1; +0.69PP from 4Q

The BEA's real final sales of domestic product was revised modestly downward (-0.07PP, to +2.46%) but it is still up +0.40PP from 4Q.  

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Consumer Metric Institute’s Rick Davis highlighted several “take-aways” from this revision: 

-- The BEA confirmed that consumer spending on goods [decelerated]. Meanwhile, the already relatively soft growth in services spending was left unchanged.

-- The annualized growth in commercial and private fixed investments was more than halved relative to 4Q.

-- Imports added +0.39% annualized growth to the headline, even though it actually reflects softening import spending in the midst of generally weaker global trade.

-- The BEA's headline number was more than doubled by an inflation rate that was materially at odds with the inflation recorded by the Bureau of Labor Statistics.

-- Nevertheless, this revision left the headline number in the "Goldilocks" zone of economic growth.

“The question remains: Are these fair skies a sign of a well-oiled and unstoppable economy? Or is this merely the calm before the next storm?” Davis concluded.

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.