Updated: 29-May-09 09:02 ET

Q1 GDP-Adv.

Updated: 29-May-09 09:02 ET

Highlights

• Q1 GDP for the U.S. was revised upward to a -5.7% annual rate of decline versus an originally reported -6.1% decline.  Economists' median forecast for the preliminary Q1 GDP number was -5.5%.
• Personal consumption expenditures growth was revised lower to 1.5% from an originally reported 2.2%.  That dropped the contribution to the change in real GDP to 1.08 percentage points from 1.50 percentage points in the advance report.
• Upward revisions to gross private domestic investment, government spending, and net exports were offsetting factors, in addition to the change in private inventories which subtracted 2.34 percentage points from the change in real GDP versus 2.79 percentage points at the time of the advance report. Core PCE held steady at 1.5%.
• Raw Data Available At: http://www.bea.gov/newsreleases/national/gdp/gdpnewsrelease.htm

Key Factors

• The prelimiary Q1 GDP number is dated information, so the market's reaction to it was somewhat muted, if not slightly negative given the downward revision to PCE. 
• Still, it stands as a reminder that the worst of the economic downturn seems to be behind the U.S.  Even though growth remains elusive, the trend is at least headed in the right direction.

Big Picture

• The trends in the economy were moderately poor through the summer of 2008.  Then, in September, the trends tanked along with the stock market.  Some tech firms noted a significant dropoff in demand right after the mini-panic of mid-September.  These worsening trends were readily apparent in the fourth quarter GDP numbers, and will remain so into 2009 as well.  Consumer spending is weakening and will only take a significant turn for the better once the declines in payroll moderate.   Business investment is also in a sharp retrenchment.  The stronger dollar clearly hurt export demand.  A lot now depends on overall psychology and perceptions of how well the government responds to the financial market and other problems such as exist in the auto industry.  The economic outlook is now as much a function of government action as it is of the traditional correlations and trends among macro-economic variables.