U.S. GDP Growth Is Revised Slightly Lower But Corporate Profits Jump, Again

Growth in real GDP last quarter was revised slightly lower last quarter to 3.0% from 3.2% estimated in the advance report. A slowdown in the rate of inventory replenishment remained, however, the dominant piece of news, slowing the economy's growth from 5.6% during 4Q '09. Consensus expectations had been for a revision upward to 3.4% growth. Regardless, 1Q remained the third consecutive quarter of positive growth after the recession when GDP fell a postwar-record 3.7% peak-to-trough.

The largest piece of the downward revision was a reduced rate of growth in business fixed investment to a still-firm 3.1%. Growth in personal consumption and government spending also was reduced slightly. Finally, the contribution to growth from foreign trade was deepened somewhat. These revisions were mostly offset by slight upward revisions to inventory accumulation and residential investment.

Price inflation was nudged up to a still-low 1.0% as measured by the chained GDP price index. The y/y gain of just 0.5% remained the lowest since the early-1950s. The personal consumption chain price index rose a reduced 1.5% but year-to-year prices increased an improved 2.0%, the quickest since 2008. The price index for fixed business investment fell 1.7% (-3.0% y/y), the fifth consecutive quarterly decline, but the residential investment price index rose for the second consecutive quarter (-1.0% y/y).

Released for the first time was the estimate of 1Q corporate profits. The 5.5% gain (31.0% y/y) was the sixth increase in the last seven quarters, a testimony to improved growth in the productivity of human capital and plant & equipment. Profits of U.S. nonfinancial companies grew 6.0% (25.7% y/y). The annual increase was the strongest since 2006. Financial sector profits grew a much-reduced 1.8% (77.2% y/y) while profits from abroad grew 9.6% (6.6% y/y).