This morning, BEA released its "third estimate" (what used to be called "final") data on 1st Quarter GDP. The number has been revised downward to a growth rate of 2.7% - from the advanced estimate of 3.2% and the second estimate of 3%. According to BEA:
The increase in real GDP in the first quarter primarily reflected positive contributions from personal consumption expenditures (PCE), private inventory investment, exports, and nonresidential fixed investment that were partly offset by negative contributions from state and local government spending and residential fixed investment. Imports, which are a subtraction in the calculation of GDP, increased.
Unfortunately, some have gotten the story wrong -- concentrating on revisions rather than the change from the previous quarter. While consumer spending was less than previously reported, it was still greater than in the previous quarter. And durable goods sales were actually up by a healthy amount. The slowdown was due to a decline in state and local government spending, a significant increase in the trade deficit and a large decline in housing.
Unfortunately, with at least two of those areas, things are only going to get worse. Latest data on housing is not good. State and local spending is set to decline further and Congress is being blocked from doing anything about it. Trade is still a wild card - since we only have data through April.
The good news is about business investment going up, specifically equipment and software. And capital spending by business seems to be continuing.
However, the GDP number do not measure investments in intangibles assets. So we don't know about that part of the equation. I know that BEA is working on this, but a measure of intangibles in the GDP is badly needed if we are to understand the direction of the I-Cubed Economy.
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