WASHINGTON — First quarter GDP growth was revised lower to a 2.0% annual rate from the 2.2% pace in the second estimate, compared with expectations for no revision, data released Thursday by the Bureau of Economic Analysis showed.
Downward revisions to PCE and business inventories growth and a wider trade gap were the key factors, supplemented by an upward revision to the GDP price index. There was some offset by upward revisions to nonresidential fixed investment, residential fixed investment, and government spending.
While the headline number for GDP was revised down and the GDP price index was revised up, the market reaction should be muted by the fact that the core PCE price index was unrevised, that gross domestic income was revised up sharply, and that corporate profits growth is now positive, as well as analysts turning their attention to the second quarter.
Growth is expected to follow its usual seasonal pattern of rebounding from a softer first quarter pace when the advance second quarter data is released next month. Continued strong PCE growth is expected to be a key part of that rebound.
The third estimate of first quarter growth suggests little change in the overall growth picture, with the mix resulting in no adjustment to either current dollar GDP or real final sales of domestic product. There was only a modest upward adjustment to real final sales to domestic purchasers. Comprehensive benchmark revisions released with the advance second quarter next month may alter the historical growth pattern.
Gross domestic income, an alternative measure of growth, was revised up sharply to a 3.6% rate from the 2.8% pace reported in last month's report, keeping it well above the 1.0% rate in the fourth quarter. As a result, the GDI/GDP average was revised up to 2.8% from the 2.5% preliminary estimate. The average was 2.0% in the fourth quarter.
Inventory investment was revised down to a $13.9 gain for the quarter from the $20.2 billion gain in the second estimate. The net export gap now stands at $656.8 billion, wider than $650.9 billion gap in the second estimate.
Within consumption, which was revised down to a 0.9% increase from 1.0% in the second estimate, there was a downward revision to services spending that was partially offset by an upward adjustment to goods spending. Both durables and nondurables spending were revised up, though durable goods spending is still down from the first quarter.
The personal savings rate was revised up to 3.3% from 3.1% in the second estimate, remaining above the 2.7% rate in the first quarter.
Nonresidential fixed investment was revised higher to a 10.4% pace from the 9.2% gain in the second estimate, with an upward adjustment to structures, equipment, and intellectual property products.
Residential fixed investment was revised up to a 1.1% rate of decline from the 2.0% decline reported in the second estimate.
Government spending was revised up to a 1.3% gain, compared with a 1.1% rise in the second estimate.
As a result of the mix of revisions, real final sales of domestic product was unrevised from the 2.0% increase in the second estimate. Real final sales to domestic purchasers was revised up modestly to a 2.0% pace from 1.9% in the second estimate.
Corporate profits were revised up to a 1.8% rate of growth after originally being reported down 0.6%
The main GDP price index was revised up to a 2.2% pace from the 1.9% rate previously reported but the remaining price measures were little altered.
The closely watched core PCE price index was unrevised from the 2.3% gain in the second estimate, still above the 1.9% gain in the fourth quarter. The year/year rate for the measure remained at 1.6%, still slightly ahead of the 1.5% rise in the fourth quarter.
