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Q1 GDP Second Estimate a Slight Disappointment at 0.8 Percent

May 27, 2016

by Doug Short

The Second Estimate for Q1 GDP, to one decimal, came in at 0.8 percent, up from 0.5 percent in last month's Advance Estimate. Today's number was a bit below most mainstream estimates, with Investing.com forecasting 0.9 percent and the Briefing.com consensus also at 0.9 percent.

Here is an excerpt from the Bureau of Economic Analysis news release:

Real gross domestic product -- the value of the goods and services produced by the nation’s economy less the value of the goods and services used up in production, adjusted for price changes -- increased at an annual rate of 0.8 percent in the first quarter of 2016, according to the "second" estimate released by the Bureau of Economic Analysis. In the fourth quarter, real GDP increased 1.4 percent.

The GDP estimate released today is based on more complete source data than were available for the "advance" estimate issued last month. In the advance estimate, the increase in real GDP was 0.5 percent. With the second estimate for the first quarter, the decrease in private inventory investment was smaller than previously estimated (see "Revisions" on page 2).

The increase in real GDP in the first quarter primarily reflected positive contributions from personal consumption expenditures (PCE), residential fixed investment, and state and local government spending that were partly offset by negative contributions from nonresidential fixed investment, exports, private inventory investment, and federal government spending. Imports, which are a subtraction in the calculation of GDP, decreased. [Full Release]

Here is a look at Quarterly GDP since Q2 1947. Prior to 1947, GDP was calculated annually. To be more precise, the chart shows is the annualized percent change from the preceding quarter in Real (inflation-adjusted) Gross Domestic Product. We've also included recessions, which are determined by the National Bureau of Economic Research (NBER). Also illustrated are the 3.23% average (arithmetic mean) and the 10-year moving average, currently at 1.30 percent.

Quarterly GDP since 1947

Note: The headline 0.8% real compounded rate of change is 0.84% at two decimal places.

Here is a log-scale chart of real GDP with an exponential regression, which helps us understand growth cycles since the 1947 inception of quarterly GDP. The latest number puts us 14.9% below trend, the largest negative spread in the history of this series.

with a Regression

A particularly telling representation of slowing growth in the US economy is the year-over-year rate of change. The average rate at the start of recessions is 3.35%. Eight of the 11 recessions over this timeframe have begun at a higher level of real YoY GDP.

Real GDP Year-over-Year

In summary, the Q1 GDP Second Estimate of 0.8 percent was a slight increase over the Advance Estimate of 0.5 percent but a bit below the mainstream expectations.

Other GDP updates:

Real GDP Per Capita

Visualizing GDP