GDP Price Index At 2.2%, Well Above Consensus Range

Inflation was a little bit warmer than thought in the first quarter, a factor that deflates the third estimate of first-quarter GDP more than expected which came in at a 2.0 percent annualized rate to just make the low end of Econoday's consensus range. The GDP price index came in at 2.2 percent which is well above Econoday's consensus range which was fixed at 1.9 percent. The GDP core, however, remains unchanged in the second estimate at 2.6 percent.

Turning to components, the third estimate erases what were small contributions from inventory growth and net exports, each turning fractionally negative. Contributions from consumer spending, now at a 0.9 percent rate, was also shaved slightly while those from nonresidential fixed investment, at a very strong showing of 10.4 percent, and residential investment at minus 1.1 percent also revised higher. The contribution from government purchases was also upgraded slightly, now at 1.3 percent.

The first quarter was yet another strong one for business, with related investment perhaps getting a boost from this year's corporate tax cut. But it was a soft one for the consumer as spending sputtered and residential investment, though revised higher in today's report, still in reverse. And inflation also made a greater-than-expected appearance in the quarter which may, given oil prices, tariff risks as well as tight conditions in the labor market, become a theme in the coming quarters as well. But for growth, the early outlook for the second quarter is extremely positive with forecasts ranging from roughly 3 to 5 percent.