Reclaiming Common Sense

All of the data from First Quarter Were Revised - Now 3.1% Growth

None of the data from Fourth Quarter were revised

There are three bites at the GDP apple: The Advance value, the preliminary value and the final value. The "final" value is never final because there is an annual revision to the prior years, plural, data every July. This year is no different.

Still Firing on all cylinders quarter to quarter. GDP revised from 3.2% to 3.1%. Remember that the Government Shutdown was supposed to trim 1% from the first quarter annualized GDP level. There were even some projecting 0.5% growth.

  • Personal Consumption Expenditures (PCE) rose at 1.3%, up from 1.2%
  • Gross Private Domestic Investments (GPDI) grew at 4.3%, down from 5.1%
  • Exports grew at 4.8% compared to 3.7%
  • Imports grew at -2.5%, up from -3.7% (yes, negative)
  • Government Consumption Expenditures (GCE) grew at 2.5% compared to 2.4%

Somehow, even with three of the four components being revised higher, Gross Private Domestic Investment (GPDI) being revised down 0.8% reduced the GDP by 0.1%. GPDI was originally contributing 0.92% of the 3.2%  GDP it was only 0.91% of the 3.1% for the preliminary value.

Same quarter GDP remained unchanged at 3.2% even after revisions. The Same Quarter GDP is the annual growth rate for the current quarter. If we have three more quarters like the first quarter we will have our first 3.0% annual growth rate in more than a decade.

  • PCE was revised higher from 2.7% to 2.8%
  • GPDI was revised lower from 5.5% to 4.7%
  • Exports were revised from 2.3% to 2.6%
  • Imports were revised from 1.6% to 2.0%
  • GCE were unchanged at 1.8%

Once again, the downward revisions of GPDI offset the upward revisions to the PCE and Net Exports.

The trend is our friend. We have had eleven straight quarters where the same quarter growth equaled or exceeded the prior quarter level.. The general trend for quarter to quarter growth f is that the same quarter is higher than the prior year.

  • 2016Q1 ...1.5% ... 2016Q2 ... 2.3%
  • 2017Q1 ...1.8% ... 2017Q2 ... 3.0%
  • 2018Q1 ... 2.2% ... 2018Q2 ... 4.2%
  • 2019Q1 ... 3.1% ... 2019Q2 ... Over 4.2%? Over 5.0%? (Look at 2015Q2)

The seasonally adjusted marts retail number for April was up 4.34% compared to April 2018. This bodes well for the PCE component. New home sales (units) and new home sales average sales price are both up this year compared to April of last year. This bodes well for the GPDI

Watch the revisions that will hit with the release of the 2019Q2 data. The current GDP report provided this disclosure"

  • "The annual update of the national income and product accounts, covering the first quarter of 2014 through the first quarter of 2019, will be released along with the "advance" estimate of GDP for the second quarter of 2019 on July 26."
  • Will these revisions shift growth from 2019 back to 2018? Will it shift growth back to 2014 and 2015 and give former President Obama is first whole year growth over 3.0%? (Table 5.)
  • The revisions last year "cheated" the current President out of his first 3.0% year. The data from 2015 was revised higher than last reported while the data from 2017 was revised lower from last reported.

The revisions will drive the narrative.

This was a better report than was reported. The economy was growing faster than the experts projected. The 5.1% growth that we saw during 2014Q2 was a bounce off a -1.0%first quarter. This year we could see a 4.2% or 4.5% growth off of a 3.1% quarter. This is significant.

It's the economy.