US GDP Climbs By More Than Previously Estimated In Q1

Advertisment The U.S. economy expanded more than previously projected in the first quarter as improved performance in trade and business investment more than made up for weaker consumer spending.

Corporate profits were revised higher, and overall gross domestic income was lifted to 2.9%, from the prior print of 2.2%. Economists polled by Reuters had expected first-quarter GDP growth would be revised up to a 1.0 per cent rate.

Export growth was revised to show a 0.3 percent rate of increase instead of the previously reported 2.0 percent pace of contraction. According to RBC Economics, the latest figure continues a pattern of weak consumer spending in the first quarter of each of the last three years, which may reflect measurement issues rather than an underlying slowdown in spending. The Atlanta Federal Reserve is now estimating second-quarter GDP rising at a 2.6 per cent rate. During the fourth quarter of 2015, real GDP grew at a rate of 1.4 percent.

When measured from the income side, the economy grew at a 2.9% rate in first quarter and not the previously reported 2.2% pace, reflecting upward revisions to corporate profits.

The government will release the advance estimate for Q2 GDP on July 29. GDI increased at a 2.9 percent annualized pace, the most since the third quarter of 2014, up from a previous estimate of 2.2 percent rate.

The revisions this time showed that businesses didn’t cut their investments as deeply as earlier thought in the first quarter. Consumption spending grew by $42.2 billion during the first quarter of 2016.

The weak household spending in the first quarter represents a new red flag. Reduced motor vehicle sales were one of the larger factors for the decline in durable goods spending, subtracting 0.32 percent from real GDP in the quarter. Reductions to outlays on transportation, financial and recreational services swamped a bigger gain in health care.

Beyond the trade data, though, Tuesday’s report actually contained a series of worrying downward revisions to key facets of the domestic economy. The survey was, however, conducted before last week’s Brexit referendum. That suggests inventories could remain a drag on growth in the quarters ahead.

This story has not been edited by Firstpost staff and is generated by auto-feed.