Final Q1 GDP Shows 1.1% Growth

WASHINGTON - The U.S. first quarter gross domestic product upward revision shows modest growth, as expected, with most of the changes to components stemming from the annual revisions to trade data and from a new services survey.

The Q1 GDP revision is up 1.1%, and the pattern was one of strengthening as new information replaced assumptions. Growth in the second quarter probably gathered further strength, especially in inventories and spending, before the Brexit vote caused market uncertainty and upset the outlook. 

Gains in exports and nonresidential fixed investment (mainly software, which now shows a 7.4% gain) were revised up in Q1.

Personal consumption expenditures were revised lower mainly in services: healthcare was upped but nonprofit, transportation, financial, and recreation spending was lowered. The changes mainly stem from a new services survey, a sector that recently has caused last minute alterations to the growth outlook.

There also has been a return to growth in state and local government spending, which was up 3.2% in Q1 and contributed 0.34 point to the overall GDP growth rate. If federal defense spending reverses its Q1 decline of 3.7% ahead (defense spending tends to bounce higher after a dip), government will be poised to add smartly to growth.

GDP prices posted a 0.4% rise in Q1, but core PCE prices posted a much higher 2.0% gain. PCE prices overall posted a 0.2% increase, a downward revision of 0.1 point, reflecting lower costs for physician and home health services.

The revision to corporate profits showed a $34.7 billion increase in Q1 for profits from current production. Profits of domestic nonfinancial corporations were up $72.9 billion, and the new breakdown showed that most of this stemmed from a turn-around in profits at petroleum and coal producers.

Gross domestic income was up 2.9%, and the average of GDP and GDI was up 2.0%.

Market News International is a real-time global news service for fixed-income and foreign exchange market professionals. See www.marketnews.com.

Market News International is a real-time global news service for fixed-income and foreign exchange market professionals. See www.marketnews.com.
MORE FROM BOND BUYER