Normally we don’t see drastic shifts in GDP reports by the final estimate, as the interim estimate in the second month usually deals with most of the dramatic updates in economic measures. For the first quarter of 2013, though, the big adjustment comes last. US GDP in the opening quarter, which was initially estimated at 2.5% and adjusted to 2.4% in the second report, limped into the finish at just 1.8% annualized growth:
Real gross domestic product –the output of goods and services produced by labor and property located in the United States –increased at an annual rate of 1.8 percent in the first quarter of 2013 (that is, from the fourth quarter to the first quarter), according to the “third” estimate released by the Bureau of Economic Analysis. In the fourth quarter, real GDP increased 0.4 percent.
The GDP estimate released today is based on more complete source data than were available for the “second” estimate issued last month. In the second estimate, real GDP increased 2.4 percent. With the third estimate for the first quarter, the increase in personal consumption expenditures (PCE) was less than previously estimated, and exports and imports are now estimated to have declined (for more information, see “Revisions” on page 3).
The big decline came in consumer spending, dropping from an earlier reported 3.6% annualized increase to just 2.6%. Exports actually contracted by 1.1% after having been estimated to have grown, CNBC reports, and business investment remained stagnant. Real final sales of domestic product, a key indicator that measures actual growth outside of inventory inflation, grew by only 1.2%, the slowest in a year.
Needless to say, this paints a bleaker picture of the economy than economists expected:
Economists polled by Reuters had expected first-quarter GDP growth would be left unrevised at 2.4 percent. When measured from the income side, the economy grew at a 2.5 percent rate, slower than the fourth-quarter’s brisk 5.5 percent pace.
Details of the report, which showed downward revisions to almost all growth categories, with the exception of home construction and government, could cast a shadow over the Federal Reserve’s fairly upbeat assessment of the economy last week.
Though the data is fairly backward looking, it comes as financial market conditions are tightening after Fed Chairman Ben Bernanke said last week the U.S. central bank would likely begin to slow the pace of its bond-buying stimulus later this year and stop the program in 2014.
Economists fear that could undercut growth, which has recently shown signs of picking up.
Well, actually it hasn’t, which is what this report shows. This comes off of a 2012 Q4 which only registered 0.4% annualized growth, which means six solid months of stagnation. We’re not seeing anything in Q2 which indicates significantly accelerated growth except perhaps in the housing markets — which did pretty well in Q1 and had its best quarter since 2012 Q2. The future, as the Fed noted, looks even more cloudy, thanks to the end of the QE Express and a lack of any solid growth to replace it.
In other words, nothing much has changed since the official end to the recession, and change doesn’t appear to be on the horizon, either.