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GDP: Strong Positive Revisions to Still Modest Q1 GDP

May 26, 2017
Bottom Line: 1st Quarter 2017 GDP was revised sharply higher in this second estimate. While still anemic, consumption growth was revised from 0.3% to 0.6%, adding 20bps to GDP. Business fixed investment was also revised higher, and the drag from government spending was modestly less than previously reported. Overall, at 1.2% annualized in the quarter, the pace of growth was still slow but is now higher than it was in the 1st Quarter of 2016, and many of the factors contributing to the weak growth appear transitory, as the Fed has noted. Estimates for 2nd Quarter GDP center around 3%.

GDP was REVISED UP by 0.5 points to 1.2% in this second estimate of economic activity for Q1-17. This was higher than market expectations for an upward revision to 0.9%.

Economic activity is now 2.0% ABOVE its year ago level and 12.4% ABOVE its 2007 Q4 cyclical peak. Because most of the adjustment was due to new March data, this revision suggests that the economic activity increased modestly at the end of the quarter.

Consumer Spending was revised higher by 0.31% to 0.6%, contributing 0.44% to economic growth.

Business Fixed Investment was revised higher by 1.98% to 11.4%, contributing 1.34% to economic growth. Residential Investment was revised higher by 0.07% to 13.7%, contributing 0.50% to economic growth. Inventory Investment was revised modestly lower, contributing -1.07% to economic growth.

Net Exports were revised modestly higher, contributing 0.13% to economic growth.

Government Purchases were revised slightly higher and fell modestly for the 3th time in the past 12 quarters, contributing -0.20% to economic growth.

As a result of all of these changes, Real Final Sales was revised moderately higher while Real Domestic Demand was revised moderately higher.

The GDP Price Index was REVISED LOWER to 2.2%, compared with market expectations for no change at 2.3%. Economy-wide prices are now 2.0% ABOVE its year ago level.