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Economy in Brief

U.S. GDP Growth is Revised Lower with Lessened Growth in Domestic Purchases
by Tom Moeller  June 26, 2013

Real GDP growth for Q1'13 was revised lower to 1.8% (1.6% y/y) from last month's estimated 2.4% rise. Expectations were for a 2.4% gain. Growth in consumer spending and business investment were significantly reduced, but residential investment growth was raised. The increase in the GDP chain price index was raised slightly to a modest 1.2% (1.6% y/y).

After-tax corporate profits fell 1.4% (+4.7% y/y), less than the initial estimate of a 2.0% decline which followed a 1.8% Q4 rise. The decline reflected weakness across sectors. Rest-of-world profits fell 4.3% (+7.4% y/y), domestic nonfinancial earnings slipped 0.5% (+3.1% y/y) and earnings in the financial sector were off 0.7% (+5.0% y/y).  

A reduced gain in final sales to domestic purchasers accounted for the GDP revision. Sales grew at a revised 1.3% rate (1.5% y/y), down from last month's estimated 1.9% rise. The gain in personal consumption expenditures was pared back to 2.6% (1.9% y/y) from 3.4%. Business fixed investment growth was lowered to 0.4% (3.7% y/y) from 2.2%. Working the other way, residential investment's advance was increased to 14.0% (13.3% y/y) from 12.0%. Unchanged was the decline in government spending. The 4.8% drop (-2.2% y/y) reflected an 8.7% shortfall (-4.0% y/y) in federal government spending. Defense outlays were off at a 12.0% rate (-6.2% y/y). State and local government investment also fell at a 2.1% rate (-1.1% y/y). 

The effect on GDP growth from inventory rebuilding was unrevised at 0.6 percentage points. It did not, however, recoup the 1.5 point subtraction during Q4. Trade deficit deterioration still lowered growth by 0.1 percentage point. It occurred as imports slipped 0.4% (-0.6% y/y) instead of rising slightly while exports fell at a 1.1% rate (+0.8% y/y) instead of increasing 0.8%.

The GDP chain price index grew at a modest and marginally changed 1.2% rate (1.6% y/y). This increase was largely influenced by an unchanged 1.0% increase (1.2% y/y) in the PCE price index, held back by lower energy prices. Also unchanged was the 6.7% rise (3.5% y/y) in the residential price index. The 0.9% increase (1.0% y/y) in the business fixed investment price index was slightly firmer than last month's report. 

The latest GDP figures can be found in Haver's USECON and USNA databases; USNA contains basically all of the Bureau of Economic Analysis' detail on the national accounts, including the new integrated economics accounts and the recently added GDP data for U.S. Territories. The Consensus estimates can be found in AS1REPNA.

Modest to Moderate Growth Expected for Rest of Year from the Federal Reserve Bank of Dallas can be found here.

Chained 2005 $, %, AR Q1'13 (3rd Est) Q1'13 (2nd Est) Q1'13 (Adv) Q4'12 Q3'12 Q1 Y/Y 2012 2011 2010
Gross Domestic Product 1.8 2.4 2.5 0.4 3.1 1.6 2.2 1.8 2.4
 Inventory Effect 0.6 0.6 1.0 -1.5 0.7 -0.1 0.2 -0.2 1.5
Final Sales 1.2 1.8 1.5 1.9 2.4 1.8 2.1 2.0 0.9
 Foreign Trade Effect -0.1 -0.2 -0.5 0.3 0.4 0.2 0.1 0.2 -0.4
Domestic Final Sales 1.3 1.9 1.9 1.5 1.9 1.5 1.9 1.8 1.3
Demand Components
Personal Consumption 2.6 3.4 3.2 1.8 1.6 1.9 1.9 2.5 1.8
Business Fixed Investment 0.4 2.2 2.1 13.1 -1.8 3.7 8.0 8.6 0.7
Residential Investment 14.0 12.0 12.6 17.5 13.6 13.3 12.1 -1.4 -3.1
Government Spending -4.8 -4.9 -4.1 -7.0 3.9 -2.2 -1.7 -3.1 0.6
Chain-Type Price Index
GDP 1.2 1.1 1.2 1.0 2.7 1.6 1.8 2.1 1.3
Personal Consumption Expenditures 1.0 1.0 0.9 1.6 1.6 1.2 1.8 2.4 1.9
   PCE less Food & Energy 1.3 1.2 1.2 1.0 1.1 1.3 1.7 1.4 1.5
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