U.S. GDP Revised Higher in Q1

Real GDP grew at a 2.0% seasonally adjusted annual rate in Q1, according to the BEA’s third estimate of the Q1 performance. This is up from last month’s 1.3% estimate and compares with the Action Economics Forecast Survey’s estimate of 1.4% for this release.

Foreign trade is a main contributor to this upward revision in overall Q1 growth. The deficit decreased from $1.239 trillion in Q4 2022 to $1.208 trillion in Q1, revised from $1.243 trillion in the previous release. Exports are now seen to have grown at a 7.8% annual rate in Q1 versus 5.2% in the prior release, while imports are now estimated at a 2.0% growth rate in Q1, down from 4.0% in the previous release. So both exports and imports contributed to the upward GDP revision.

The change in business inventories, which had subtracted 2.10% from GDP growth in the prior BEA release is currently little different, now just subtracting 2.14%.

Thus, final sales to domestic purchasers are now estimated by BEA to have grown at a 3.5% annual rate in Q1, up just slightly from the 3.3% reported last month.

Consumer spending is now shown to have grown at a 4.2% annual rate in Q1, up from 3.8% in last month’s estimate. Durable goods outlays still have a sizable increase, 16.3% annual rate, down marginally from 16.4% reported before, and nondurable goods spending was revised to 0.5% growth from 0.9% before. Services outlays growth was revised upward to a 3.2% annual rate, up from 2.5% in the previous report. The difference in services is shown in health care, up 10.0% versus 7.7% in last month’s report, recreation services up 6.1% versus 2.8% and “other” services, up 3.6% versus 2.8%. Financial services, in contrast, grew at a 2.1% annual rate, down from 4.0% in last month’s report.

Nonresidential fixed investment was revised down moderately, now showing a 0.6% annual rate of growth in Q1, versus 1.4% reported before. Nonresidential structures are now seen with an 11.0% growth rate, down from 15.1% and equipment with an 8.9% rate of decline down from 7.0% in last month’s report. Intellectual property spending is now estimated to have grown at a 3.1% pace, down from 5.2% shown before.

Residential investment, by contrast, was revised up somewhat, so it is now estimated with a 4.0% rate of decline in Q1, less weak than the previous report of -5.4%.

Government purchases of goods and services are little changed in the new estimates, with a 5.0% rate of growth in Q1, down slightly from 5.2% in last month’s tally. Federal government purchases grew at a 6.0% pace, less than the 7.6% reported before, while state and local government purchases grew at a 4.4% pace, up from 3.8% previously shown.

There was marginally less inflation in Q1 than shown before, with the GDP price index increasing at a 4.1% annual rate, down from 4.2% in the previous report but still up slightly from 3.9% in Q4 2022. The Action Economics Forecast Survey expected a repeat of the 4.2% pace. The PCE chain price index had the same comparisons as overall GDP, with the total PCE price index up at a 4.1% pace after last month’s report of a 4.2% rate of increase. The PCE price index less food and energy rose at a 4.9% annual rate in Q1, down slightly from the 5.0% pace reported before. Prices for nonresidential fixed investment picked up somewhat, rising at a 7.2% annual rate in Q1 versus 6.9% previously reported. Residential investment prices did show a noticeable downward revision in Q1, down at a 2.5% rate, revised from a 1.4% decline reported before. This housing price measure had advanced at a 5.1% pace in Q4 and even an 18.9% pace in Q1 2022.

The GDP data can be found in Haver's USECON and USNA databases. USNA contains virtually all of the Bureau of Economic Analysis detail in the national accounts. Both databases include tables of the newly published not seasonally adjusted data. The Action Economics consensus estimates can be found in AS1REPNA.