The third estimate of first quarter GDP came in at +1.1%, revised up from the second estimate of +0.8%.
A small bounce was expected. The Bloomberg Econoday consensus estimate was 1.0% in a range of 0.9% to 1.2%.
Strength in net exports and less weakness in nonresidential fixed investment gave a boost to first-quarter GDP which rose 1.1 percent in the 3rd estimate vs plus 0.8 percent for the second estimate. Net exports added more than 1 tenth to GDP as exports rose slightly in the quarter and imports fell. An upward revision to software helped shave the negative contribution from nonresidential investment by 2 tenths to 6 tenths. On the downward side, the positive contribution from personal consumption expenditures was lowered by nearly 3 tenths to 1 percentage point as service spending was cut. Inventories were little changed in the revision, subtracting 2 tenths from GDP which is welcome news as inventories are poised to be restocked. Residential investment was a main positive in the quarter, adding 5 tenths to GDP. Early estimates for second-quarter GDP are running at about 2 percent, a more respectable rate but still far from robust especially with the third-quarter outlook clouded by Brexit.
The BEA used to call the three GDP released advance, preliminary, and final. Now they are advance, second, and third.
As we have seen there is nothing ever final about GDP. Next month the BEA will release GDP revisions dating back 11 years.
Dateline June 28, 2016: The third quarter starts in 3 days. We are still discussing first quarter.
Let’s dive into the BEA GDP Release for additional details.
Contributions to GDP
- Consumer spending was weaker once again. The last 4 quarters contributions to GDP by personal consumption expenditures (counting this one) are 2.42, 2.04, 1.66, 1.02, in order.
- Of the 1.02 percentage points of personal consumption expenditures, health care spending contributed 0.63 percentage points. Thank you Obamacare. Motor vehicles and parts took off 0.32 percentage points.
- Overall, gross private domestic investment subtracted 0.29 percentage points. Of that total, nonresidential investment took off 0.58 percentage points while residential added 0.52 percentage points. Transportation took off 0.21 percentage points.
Residential housing and health care were the biggest positive components of GDP. That’s pretty much all that’s left of this economy.
Mike “Mish” Shedlock