Second Estimate For First Quarter GDP Drops One Tenth

Consumer spending gets a marginal upgrade while business investment and residential investment get small downgrades in the second estimate of what was a very strong first quarter for GDP. The 3.1 percent headline is down 1 tenth from the initial report but is 1 tenth above consensus.

Consumer spending is revised up 1 tenth to a 1.3 percent annual growth rate with inventories adding a bit less to the quarter and net exports, where improvement made for the strongest of any of the GDP components, also adding slightly less. Government purchases also added to the quarter as did fixed business investment where growth, however, was shaved 4 tenths to a more moderate 2.3 percent growth rate. Residential fixed investment, which has fallen for five straight quarters, is revised 7 tenths lower to 3.5 percent annual contraction. Price readings are also shaved, 1 tenth each overall to 0.8 percent and 1 tenth for the core to 1.2 percent.

Despite the soft showing for the consumer, the first quarter proved very strong in the end getting a boost from net exports. Whether trade improvement will continue is uncertain given not only unknowns over escalating tariff actions but also following the April widening in the goods deficit.