United States: Revised data reveal economy contracted in Q1
May 29, 2015
In the first quarter, GDP decreased at a seasonally adjusted annualized rate (SAAR) of 0.7%, according to the second estimate released by the Bureau of Economic Analysis (BEA) on 29 May. The print marked a downward revision from the 0.2% expansion reported in the advance estimate, but came in just above market expectations of a 0.8% decline. The result was much weaker than the 2.2% growth registered in Q4. Private consumption data was slightly weaker than initially reported, while government spending and exports growth were revised downward more significantly. Despite the negative result, analysts point out that the economy was dragged down by temporary factors and argue that a recovery is already underway in Q2.
On the domestic side of the economy, private consumption rose 1.8%, which was just below the 1.9% growth reported in the advance estimate. This result was a far cry from the 4.4% tallied in Q4 and marked the weakest growth in four quarters. Non-residential fixed investment swung from a 4.7% increase in Q4 to a 2.8% decrease in Q1 (advance estimate: -3.4% quarter-on-quarter SAAR). Meanwhile, residential fixed investment grew 4.9%, which was well above the 1.3% rise reported in the advance estimate. Government spending contracted 1.1% in Q1 (advance estimate: -0.8% qoq SAAR). Moreover, business inventories presented a smaller boost to GDP than initially reported.
On the external front, exports were revised downward and imports were revised upward. According to the second estimate, exports decreased 7.6% in Q1 (advance estimate: -7.2% qoq SAAR). This marked a significant drop from the 4.5% expansion registered in Q4. Imports grew 5.6% in the first quarter (advance estimate: +1.8% qoq SAAR). As a result, the external sector’s net contribution to overall growth deteriorated from minus 1.0 percentage points in Q4 to minus 1.9 percentage points in Q1.
Author: Carl Kelly, Economist