U.S. Q1 GDP growth upwardly revised to 1.4 pct, likely to accelerate to 2.5 pct in Q2

The third estimate of the U.S. first quarter GDP saw a 0.2 percentage points upward revision. Therefore, the economy is now reported to have grown 1.4 percent quarter-on-quarter saar in the first quarter, as compared with the second estimate of 1.2 percent. When compared with the advance estimate, this shows a considerable upward revision of 0.7 percentage points. The upward revision mainly came from personal consumption growth that was revised up to 1.1 percent from the second estimate of 0.6 percent and the advance estimate of 0.3 percent.

In this category, services consumption led the revisions, with growth now estimates at 1.4 percent. Nondurable goods consumption was also upwardly revised by two-tenths. But consumption of durable goods continues to be in negative territory amidst a drag from autos. The revisions seen in today’s report take the contribution of personal consumption to overall GDP higher to 0.8 percentage points when compared with 0.2 percentage points reported in the advance release, pinning it as the main driver of growth, noted Barclays in a research report.

Meanwhile, the trade data saw positive revisions, led by exports growth. But fixed investment was downwardly revised, where downward revisions to structures and intellectual property more than countered an upgrade in the rate of spending on equipment. Government consumption was revised to indicate a small drag on growth, mainly because of stronger spending on the state and local level. These revisions resulted in final sales to domestic purchasers to rise from 2.1 percent to 2.3 percent.

Overall, the third estimate of the first quarter GDP shows a better picture of the U.S. economy. While growth in the first quarter is still lower than the previous quarter, the deceleration is not as pronounced as previously stated.

“We see this as consistent with our forecast of a more modest rebound in Q2 growth, compared with what consensus is expecting. We continue to forecast a rebound to 2.5 percent growth in Q2, and for about 2.0 percent growth Q4/Q4 for 2017 as a whole”, added Barclays.

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