The consensus opinion got GDP right this month for the first time in three quarters.
Real GDP rose an as expected 2.6% Revisions took the first quarter down to 1.2% from 1.4%. Real GDP was revised up 0.2 percentage point for 2014, was revised up 0.3 percentage point for 2015, and was revised down 0.1 percentage point for 2016.
Inventories were negative for the quarter as sales were higher than expected. The GDP price deflator was 1.0% contributing to the rise in real spending.
Real GDP
First Quarter Revisions
Real GDP 2013 Q4 to 2017 Q1 Average Annual Rates
Revisions Likely
By the time we get to the third estimate of second quarter GDP, the average revision will be .06 percentage points in any direction.
Percent Change from Previous Period
GDPNow, Mish, BEA
Final Comments
I had some offsetting errors, as did Pat Higgins at GDPNow.
Curiously, back on May 1 when the GDPNow initial projection came out, I had CIPI as low as -0.3% but my initial estimate rose over time. I also did not think residential investment was going to be a boost. Warm weather pulled home construction forward.
I boosted my forecast on Friday based on reports that showed inventory growing at a rapid clip.
Something is likely to give here. The GDP number may be too low if CIPI gets revised up. Alternatively, we may see the next set of numbers unchanged with inventory rising and PCE falling.
As it stands, Pat nailed the PCE number. I was off by a full percentage point. The FRBNY Nowcast predicted 2.04% overall, but that report has no breakdown so we do not know where or by how much they got things wrong.
I sent Pat a note of congratulations for homing in on the estimate over time after being way too high in his initial report.
Mike “Mish” Shedlock
The US economy may indeed be growing at close to a 2% annual rate. I still consider that to be the upper end for the US over the next 3 years, though I will stick with my 1% prediction. I have also been surprised with Canada’s GDP growth, which came out at 4.6% today. As well, the IMF recently raised growth projections for almost every country in the world, except the US. Perhaps they will now change their US projections as well.
As I keep saying, slow growth should continue. No recession or depression in sight.
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Meh, Canada is really just a state that’s allowed to pretend that they are their own country.
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Canada’s proximity to the US certainly means it’s economy is highly integrated with America’s, but I expect that most Canadians would take issue with your statement. That’s kind of like saying that Australia is a Chinese province.
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Nah, Australians at least have their own TV (crappy as it may be), and the Chinese can’t drive to Australia. Go to Florida in February, you’ll see more licenses from the state of Canada than from Florida.
Truth is, the majority of my family lives in Canada. So this is a long running joke between us.
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Your points are good ones. Last week I mentioned that Canadians were buying a lot of Florida properties (while Chinese buyers focused on California, and Mexican buyers on Texas).
Are your relatives happy with the Canadian health care system (a popular topic here)? Canada’s system costs around 11% of GDP vs 17+% in the US. The people I know in Canada seem very happy with their system.
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Funny question. One of my cousins, who I adore, is a director at Montreal Children’s Hospital at McGill. With that said, her mother – my aunt, had a stroke a few years back but uses all private care. No real polite way to put it, other then they can easily afford it.
Healthcare in the U.S. is an absolute mess. My brother-in-law is a Cardiologist in NYC and I needle him all the time about it. Only out of fun though, since I am admittedly detached and unaware to much of the goings on in the real world, to which he consistently needles me over.
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No sign of an incipient recession in the data yet, but money supply and credit growth have been in free-fall since the election. Narrow true money supply growth has gone from 16.5% to 1.5% since then, the lowest since 2007. There will be a very sharp slowdown in economic activity as a result, and per experience there will be little warning (I predict that business owners will say something like “it was as though someone had flipped a light switch”). Reported output “growth” is imo little more than an inflationary illusion – since January 2008, the broad true US money supply has grown by a cumulative 142% (!!!). That’s one way of throwing a party, but it was a very slow party and it has set up a huge hangover anyway.
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Hi Pater. A slowdown would not surprise me, but a recession would. With the rest of the world “slowly” accelerating, it should drag the US along.
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Homing in, not honing in.
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yes
thanks
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The dramatic difference in the PCE deflator between the first and second quarter seems suspect.
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I expect that most Canadians would take issue with your statement. That’s kind of like saying that Australia is a Chinese province….
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Reblogged this on John Barleycorn and commented:
Government spending is up is the bad news.
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