The BEA's third estimate of Q1 GDP revised growth higher to -0.2% q/q saar from -0.7% in the second estimate, in line with consensus expectations (both -0.2%) heading into the report. Personal consumption was revised higher to 2.1% from 1.9%. The revision to consumption is consistent with recent data on retail sales and health care spending, the latter of which came from the Quarterly Services Survey. Government consumption was also revised modestly higher and revisions to exports and imports resulted in no change in the trade balance.
"As we have written previously, we do not believe that economic activity stalled in the first quarter. Given the adverse weather early in the year, the significant distortions to trade from the port strikes on the West Coast, and the effect of residual seasonality that has consistently suppressed growth in Q1 relative to remaining quarters during the recovery, we are inclined to look through the softness in the GDP statistics." says Barclays
Altogether the details of the third estimate show a more balanced growth profile, with modestly stronger consumption and investment and no change in the contribution from trade. Other data on labor markets, including jobless claims, payroll growth, and the unemployment rate, and readings on the ISM surveys are more consistent with a modest pace of economic activity.
"Although the third estimate of Q1 GDP reported revisions in line with our expectation, the upward revision to consumption was a bit less than expected (2.1%, forecast: 2.3%) and the boost from inventories was a bit more than expected. Stronger inventory investment in Q1 implies a larger sequential decline in Q2 and, on net, a modestly larger drag on second quarter GDP growth. As a result, our Q2 GDP tracking estimate fell one-tenth to 3.0%" adds Barclays
