First Quarter GDP Growth Bumped Up to 1.4 Percent

First Quarter GDP Growth Bumped Up to 1.4 Percent

The U.S. economy grew at a faster clip than previously believed in early 2017.

By Andrew Soergel, Economy Reporter June 29, 2017

First Quarter GDP Growth Bumped Up to 1.4 Percent
A woman walks with shopping bags on Dec. 7, 2010, in New York City.

Consumer spending was revised up in the government’s latest economic growth projections.

Though the U.S. economy wasn’t exactly firing on all cylinders in January, February and March, revisions to the first quarter’s previously reported gross domestic product data show growth was slightly better than previously believed.

The Bureau of Economic Analysis now estimates the country’s GDP ticked up at a 1.4 percent clip during the first three months of the year, according to a Thursday report. That’s twice the growth originally reported back in April, though it still represents America’s softest performance in a year.

The bulk of the changes came from upwardly revised personal consumption data. Consumer spending, which accounts for the lion’s share of U.S. growth in any given quarter, ended up expanding at a rate of 1.1 percent. Back in April, consumption was believed to have ticked up just 0.3 percent.

Exports also enjoyed a considerable bounce in Thursday’s report, maintaining an apparent 7 percent growth rate in the first quarter of the year. That’s up from an initial 5.8 percent estimate.

Less optimistically, though, nonresidential private fixed investments – a proxy for the capital businesses are pumping into their own operations to boost productivity and, eventually, employee pay – weren’t nearly as strong as was previously reported. Such investments ticked up 10.4 percent in the first quarter – a full percentage point shy of the 11.4 percent gain the BEA reported in May.

 “The economy was slightly stronger in the first quarter than previously reported, but was still nothing to write home about,” Jim Baird, a partner and chief investment officer at Plante Moran Financial Advisors, wrote in a research note Thursday. “While not a positive outcome, it’s also unlikely [to] have legs. A combination of strong labor market conditions, growing income, and a broadly upbeat consumer mood should support stronger spending in the coming months.”

It’s not uncommon for GDP numbers to be revised significantly after they are first released. The bureau schedules three separate estimates – all spaced a month apart – for each quarter’s GDP report. The first estimate was published in April and the second in May. Thursday’s third estimate is the final release on the BEA’s calendar before it releases its initial findings for April, May and June next month.

Analysts are expecting the economy to rebound considerably in the next report, as the first quarter was marred by underwhelming consumer spending. The Federal Reserve Bank of Atlanta on Monday projected America’s GDP would accelerate to a 2.9 percent growth rate in the second quarter. That would be the best rate of expansion the economy has seen since July, August and September of 2016.

“Looking ahead at Q2, we anticipate a solid rebound … as consumer spending bounces back from a soft start to the year, while business investment and residential construction provide a continuation of firming growth on the quarter,” Sam Bullard, a senior economist and managing director at Wells Fargo Securities, wrote in a research note earlier this week. “Note, starting in July, the U.S. economy will have entered its ninth year of the current expansion.”

U.S. First-Quarter GDP Gets Consumption Boost to 1.4%