1Q20 GDP: Slight Negative Revisions

May 28, 2020
Bottom Line: GDP for the 1st Quarter was revised lower, in line with our estimates, but below the consensus estimates for no change. Inventory investment drove the revisions. The hit from consumption was revised slightly less negative. While this would typically be an indicator that the Quarter ended on a positive note, it is most likely just noise given the magnitude of the move and the difficulty tallying many metrics. Most indicators suggest consumption fell further in April. After tracking in the 2-3% range for the first two months of the Quarter, the economy took an enormous hit due to the shutdowns for the novel coronavirus. On the plus side, our nowcasting models suggest consumption bottomed in mid-April. Residential investment was revised lower but remained a positive contributor -- most housing data suggests it could still be a net positive in the 2nd Quarter, even after construction shutdowns in April. Still, the scale of the hit to economic growth is shocking and suggests it will be well into 2021 before the economy recovers to pre-covid levels. GDP was REVISED DOWN by 0.2 points to -5.0% in this second estimate of economic activity for Q1-20. This was lower than market expectations for no change revision to -4.8%. Economic activity is now 0.3% ABOVE its year-ago level and 26.5% ABOVE its 2007 Q4 cyclical peak. Because most of the adjustment was due to new March data, this revision suggests that the economic activity declined modestly at the end of the quarter.
  • Consumer Spending was revised higher by 0.78% to -6.8%, contributing -4.69% to economic growth.
  • Business Fixed Investment was revised higher by 0.77% to -7.9%, contributing -1.06% to economic growth.
  • Residential Investment was revised lower by -2.58% to 18.5%, contributing 0.66% to economic growth.
  • Inventory Investment was revised sharply lower, contributing -1.43% to economic growth.
  • Net Exports were revised modestly higher with a slight decline in Exports and slight decline in Imports, contributing 1.32% to economic growth
  • Government Purchases were revised slightly higher but grew slightly for the 10th time in the past 12 quarters, contributing 0.15% to economic growth.
As a result of all of these changes, Real Final Sales was revised moderately higher while Real Domestic Demand was revised higher. The GDP Price Index was REVISED LOWER by -0.07 points to 1.3%, compared with market expectations of 1.3%. Economy-wide prices are now 1.7% ABOVE its year-ago level.