1Q2023 Gross Domestic Product: Second Estimate

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In its second estimate of 1Q2023 gross domestic product (GDP), the Bureau of Economic Analysis (BEA) revised the growth of the U.S. economy to a seasonally adjusted and annualized rate (SAAR) of +1.27% (+1.1% expected), up 0.21 percentage point (PP) from the “advance” estimate (“1Qv1”) but -1.29PP from 4Q2022.

As with 1Qv1, two groupings of GDP components -- personal consumption expenditures (PCE) and government consumption expenditures (GCE) -- contributed positively to the headline; also, private domestic investment (PDI) detracted from it. However, whereas net exports (NetX) had also contributed positively to the 1Qv1 headline, it was neutral in 1Qv2. The 1Qv2 increase in real GDP “reflected increases in consumer spending, exports, federal government spending, state and local government spending, and nonresidential fixed investment that were partly offset by decreases in private inventory investment and residential fixed investment,” the BEA said. “Imports, which are a subtraction in the calculation of GDP, increased.”

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As for details (all relative to 1Qv1):

PCE. Consumer spending was revised up by $2.1 billion (chained-2012 dollars), led by spending on services (+$3.8B) -- primarily health care (+$11.3B). That gain was partially offset by a -$2.1B revision to goods spending -- especially food and beverages (-$1.3B) and motor vehicles and parts (-$1.1B).

PDI. Fixed investment was revised up by $10.2B, led by software (+$7.4B); residential investment was trimmed by -$1.8B. Private inventories were boosted by +$8.5B -- especially nonfarm (+$8.0B).

NetX. Upward revisions to exports (+$2.1B) were more than offset by a boost to imports (+$9.6B).

GCE. Revisions to state and local gross investment (+$4.6B) dominated this category.

The BEA’s change in real final sales of domestic product -- which ignores inventories -- was revised to +3.37% (+0.05PP from 1Qv1), a level 2.28PP above the 4Q2022 estimate. 

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Looking forward, many economists think a recession is inevitable by the end of the year. They view the seeming green shoots in April (e.g., April’s CFNAI) as a feint, pointing to softer consumer spending, waning business investment and the slumping housing and manufacturing industries.

“The march to recession continues, with some rest stops along the way,” said TS Lombard’s Steve Blitz.

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.