Reclaiming Common Sense

The first revisions to the first quarter GDP data was released.Both the annualized GDP number, the quarter to quarter projection for the entire year based on one quarter, and the Same Quarter Real GDP, the growth from the first quarter of 2017, were revised slightly lower than originally reported in the advance GDP report. This does not make sense. We have seen regular upward revisions to the first quarter MARTS Retail data and we have a Consumer Price Index inflation rate for "all items" over 2.0%. for the past six months. This is important because Personal Consumption Expenditures is one of the four main components of the GDP. The other components are Gross Private Domestic Investment (GPDI,) Imports/Exports, and Government Expenditures. So what was reported in the Preliminary First Quarter GDP report this month.


The Annualized first quarter GDP was reduced from 2.3% to 2.2%. Remember hat the Table 1 "Annualized" GDP has been below 2% during the first quarter of the year eight of the past fourteen years. The annualized rate has been negative four times during the same period of time. What is interesting is that the GDP places PCE at just 1.0% during the first quarter. Yes, the GDP data reflects the "deflation" that has been "reported" for goods and the inflation that has been reported for services. GDPI is up 7.2%. GDPI is up 2.5% from the 2017q4 value, according to the FRED website. If this is carried out 3 more times then the "annualized: GDPI should be over 10%.  Imports and Exports are up a net 4.2%. Even Government Expenditures are up 1.1%. All of the sectors of GDP are growing. 


The Same Quarter GDP was revised to being up "only" 2.8%. The Same quarter GDP has been rising for "only" seven quarters. The GDP is a trailing economic indicator. It tells use where we have been. The same quarter GDP value is really trailing. It compares us to where we were last year at his time.  We had declining growth values from 2012Q2 through 2013Q2 and from 2015Q2 through 2016Q2. There is no corresponding "contributions to GDP" table for the Table 8 data. That said, PCE is up 2.6% compared to 2017Q1, GPDI is up 5.8%, Imports are up 4.3%, Exports are up 4.2% and Government Consumption is up 1.1%.


The Personal Consumption data does not make sense. We know that inflation is over 2%. We know that retail sales were up during the first quarter. The first quarter of 2017 retail sales were $1.328 trillion. First quarter sales this year are currently posted at 1.394 Trillion. That is an increase of 5.03%, non-seasonally adjusted. When will the GDP reflect this surge in consumption, seasonally adjusted? After the Annual Revisions? After the mid-term elections?


It's the Economy.