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Economy in Brief

U.S. GDP Growth is Revised Higher; Personal Consumption Strengthened
by Tom Moeller  June 29, 2017

Economic growth was revised to 1.4% during Q1'17, up from 1.2% estimated last month and 0.7% estimated initially. Growth remained the weakest in three quarters. A 1.2% advance had been expected in the Action Economics Forecast Survey. Raised estimates of consumer spending and foreign trade accounted for the revision.

After-tax corporate profits without IVA & CCA declined 0.7% (+11.5% y/y), a bit more than estimated earlier, following four quarters of strong increase. Before-tax profits with IVA & CCA fell 12.3% (+3.3% y/y). Nonfinancial sector earnings declined 1.0% (-5.0% y/y). Earnings in the financial sector fell 5.4% (+12.4 y/y) while foreign sector earnings declined 2.1% (+20.3% y/y).

Growth in personal consumption expenditures was increased to 1.1% from 0.6%, but it remained the weakest advance since Q2'13. Growth in services purchases was revised higher to 1.4% (2.4% y/y), but it still was restrained by a 1.1% decline (+1.1% y/y) in housing & utilities outlays. Health care outlays rose an increased 2.3% (3.9% y/y) while recreation spending increased a lessened 2.6% (1.7% y/y). Restaurant & hotel spending rose a little-changed 2.7% (1.9% y/y). Nondurable goods outlays increased a little-changed 1.6% (2.5% y/y), a gain held back by a smaller 5.7% decline in spending (-2.5% y/y) on energy products. Clothing outlays also fell a little-changed 4.9% (-0.3% y/y), but food purchases rose an increased 3.3% (5.0% y/y). Overall consumption growth was held back by a little-changed 1.6% decline (+7.7% y/y) in durable goods spending which followed three straight quarters of 9%-to-12% growth. Motor vehicle outlays declined an increased 14.4% (+6.8% y/y) and reversed most of the Q4 jump. Offsetting this decline was a raised 13.6% surge (13.0% y/y) in recreational goods & vehicle consumption and a little-changed 3.1% gain (5.6% y/y) in home furnishings & appliances purchases.

Business fixed investment rose a lessened 10.4% (3.3% y/y), still the strongest increase in five years. Structures investment surged a reduced 22.5% (7.1% y/y), after declining during all of 2015 and 2016. Producers durable equipment outlays rose an increased 7.8% (0.5% y/y), only the second increase since Q3'15. Industrial equipment outlays gained a softened 7.6% (4.7% y/y). Information processing equipment investment rose a strengthened 14.0% (5.4% y/y) and intellectual property product investment gained a little-changed 6.4% (4.9% y/y). Residential investment surged a lessened 12.9% (2.3% y/y).

The decline in government sector outlays was lessened to 0.9% (-0.4% y/y), but spending still fell to the lowest level since Q3'15. Federal government investment declined a little-changed 2.0% (-0.3% y/y), led by a 3.9% drop (-2.2% y/y) in defense spending. Nondefense purchases improved 0.7% (2.4% y/y). State & local government spending fell 0.2% (-0.5% y/y).

A 0.3 percentage point contribution to growth from the foreign trade sector was slightly more than estimated initially, and reflected a strengthened 7.0% gain in exports (3.4% y/y) and a little-changed 4.0% rise in imports (3.8% y/y). A reduced rate of inventory investment sapped 1.2 percentage points from overall economic growth. That was upwardly revised and reversed the Q4'16 addition.

The gain in the chain-type GDP price index was lessened to 1.9% both q/q and y/y. A 2.2% rise was expected. The business fixed investment price index rose a lessened 1.1% (0.9% y/y). The PCE price index advanced an unchanged 2.4%, the quickest rate of increase since Q2'11. Growth in the residential investment price index slowed to a little-changed 1.7% (4.5% y/y), the slowest growth since a decline in Q2'15.

The GDP figures can be found in Haver's USECON and USNA database. USNA contains virtually all of the Bureau of Economic Analysis' detail in the national accounts, including the integrated economic accounts and the recently added GDP data for U.S. Territories. The Action Economics consensus estimates can be found in AS1REPNA.

Taxing the 1 Percent from the Federal Reserve Bank of Philadelphia is available here.

Chained 2009 $ (%, AR) Q1'17 (Third Estimate) Q1'17 (Second Estimate) Q1'17 (Advance Estimate) Q4'16 Q3'16 Q1'17 Y/Y 2016 2015 2014
Gross Domestic Product 1.4 1.2 0.7 2.1 3.5 2.1 1.6 2.6 2.4
  Inventory Effect -1.2 -1.0 -0.9 1.0 0.5 -0.1 -0.4 0.2 0.0
Final Sales 2.6 2.2 1.6 1.1 3.0 2.2 2.0 2.4 2.5
  Foreign Trade Effect 0.3 0.2 0.1 -1.7 0.9 -0.1 -0.1 -0.7 -0.1
Domestic Final Sales 2.3 2.0 1.5 2.8 2.1 2.3 2.1 3.1 2.6
Demand Components
  Personal Consumption Expenditures 1.1 0.6 0.3 3.5 3.0 3.0 2.7 3.2 2.9
  Business Fixed Investment 10.4 11.4 9.4 0.9 1.4 3.3 -0.4 2.1 6.0
  Residential Investment 12.9 13.7 13.7 9.6 -4.1 2.3 4.9 11.7 3.5
  Government Spending -0.9 -1.1 -1.7 0.2 0.8 -0.4 0.9 1.8 -0.9
Chain-Type Price Index
  GDP      1.9 2.2 2.3 2.1 1.4 1.9 1.3 1.1 1.8
   Personal Consumption Expenditures 2.4 2.4 2.4 2.0 1.5 2.0 1.1 0.3 1.5
     Less Food/Energy 1.9 2.1 2.0 1.3 1.7 1.5 1.7 1.4 1.6
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