Pick your poison: Revised U.S. GDP number say U.S. economy is slowing--or maybe not

05/26/2011 3:42 pm EST


Jim Jubak

Founder and Editor, JubakPicks.com

Nasty surprise in this morning’s revision to first quarter U.S. GDP numbers.

Not on the top line really. Real (that means after subtracting inflation) GDP growth for the quarter stayed at 1.8% in these revisions, exactly the same as in the last estimate. (All GDP numbers are estimates until the final reading comes in about a year after the quarter is over. Of course, nobody cares by that point.)

Economists had been expecting that the revision would take growth up to 2.0% for the quarter.

As economists had expected, increases in exports, nonresidential fixed investment, and inventories pushed the GDP growth figure upwards in this revision. And as expected an increase in imports took back some of those gains.

What economists hadn’t been expecting, however, was a downward revision to personal consumption expenditures. Economists had projected that this number would climb because preliminary reports on retail sales suggested that consumers had upped their spending.

But the revision actually took retail sales down from the 0.8% growth estimate in the last read on GDP to just 0.6% growth. Both of these figures were much, much lower than the 6.7% growth recorded in the fourth quarter of 2010. Real final sales growth in the first quarter of 2011 has, by these figures, dropped back to where it was in the third quarter of 2009. That was the first quarter after the recession ended.

If you believe U.S. economic growth isn’t slowing, you can say these figures are just a single quarter and represent a shock to consumer spending from higher gasoline prices. Growth should rebound next quarter.

If you believe U.S. economic growth is slowing, you can argue that increases to inventories accounted for the bulk of growth in this quarter. That’s not good since unless inventories get sold, inventory growth stops. This quarter, then, is a sign of a slowing for the rest of the year.

The unfortunate aspect to these numbers is that I think you can make either case. In other words, if you’re looking for clarity on where the U.S. economy is headed you won’t find it in these numbers.


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