US GDP Second Estimate

28th May 2014

US GDP Second Estimate – 29/05/14

No sooner was the dire US first quarter reading of 0.1 per cent annualised growth released, than market rumours started that growth would be revised higher in later releases. Most agreed with the Fed’s assertion that meagre growth was weather-related and that March would see a rebound.

Subsequent personal spending and retail sales data has shown that the GDP number had underestimated consumption’s contribution to first quarter output, albeit slightly. The sector was the sole positive contributor to output at the start of the year and now it appears consumers had a bigger impact in offsetting declines across exports, inventory, investment and government spending. Early hopes for an upward revision in GDP were soon reversed with downgrades in construction spending and soft factory orders and, while inventory growth was upgraded for February, overall it fell short of provisional estimates already pencilled in by the Department of Commerce.

The initial estimate of 0.1 per cent annualised first quarter growth was actually an optimistic view by the US Commerce Department. Now policymakers face the reality that growth could be revised into negative figures. The second GDP estimate could reveal that output contracted in the first three months of the year, between -0.3 and -0.2 per cent annualised. While only a slight fall, it is significant as this is the first time we have seen negative growth in the US since the dark days of 2008-2009.