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