WASHINGTON (MNI) - The U.S. Q1 GDP revision shows modest growth but contains the seeds for a bounce in Q2.
Q1 GDP was revised up 0.3 point to +0.8%, still a slow pace, but with favorable underpinnings such as a 1.9% gain in personal consumption. The last time GDP was so slow was the +0.6% pace in
Q1:2015.
Up-revisions to inventories, residential investment, and exports all added, but not by much. These stemmed from new source data.
The benchmarked inventories data were incorporated, and upward revision to the residential component stemmed from multifamily structures. The upward revision to goods exports was primarily in "other goods" in the territorial adjustment, and in consumer goods.
GDP prices posted +0.6%, but core PCE prices posted a larger +2.1% (the fastest pace for core inflation since Q1:2012). These show an underlying rise.
Gross Domestic Income was up 2.2%, a stronger showing than the overall headline. This indicates that the consumer can continue to support growth ahead. Also, Q4 wages were revised up $43.8 billion, so the ability to spend is high.
The Q2 growth rate should rebound. Data available so far suggest housing and auto sales are doing better in spring. Poor winter weather was only partly to blame for the surge in savings in Q1. It appears consumers were simply more cautious during that period.
Corporate profits from current production increased $6.5 billion in Q1, a very modest move after a drop of $159.6 billion in Q4. Profits of nonfinancial corporations were up $45.7 billion after posting -$129.2 billion, and these were the main swing factor. Profits before tax were up 1.4% after two periods of decline -- a weak showing that suggests there may not be huge support for large investment projects ahead.
Annual revisions to GDP are due on July 29 when the Q2 GDP report is released.
