- Real GDP grew 6.4% (annualized) in the first quarter, unchanged from the first estimate.
- Upward revisions to consumer spending and business investment were offset by downward revisions to exports and inventories.
- Consumer spending jumped 11.3% (annualized) in Q1 (vs 10.7% in the advance estimate) as durable goods spending was revised up to 48.6% (41.4% prev.) as spending on motor vehicles was revised higher.
- Business investment grew 10.8% (9.9% prev.), due to an upward revision to spending on intellectual property products, which rose 16.9% in Q1. Spending on software and R&D was revised higher.
- Exports fell 2.9%, revised down from a 1.1% decline on lower exports of petroleum and products. Inventory investment subtracted 2.8 percentage points from growth, versus 2.6 percentage points in the advance estimate.
- The core PCE deflator was also revised up 0.2 percentage points to 2.5% (quarter/quarter, annualized), due to upward revisions for used vehicle prices.
- Corporate profits fell slightly ($0.2 billion) in Q1, after falling $31.4 billion in Q4. Corporate profits were affected by a legal settlement paid by Boeing ($2.5 billion).Corporate profits were 10.4% of GDP in Q1, which is in line with their 2019 share.
Key Implications
- There was not a lot of new news in today’s GDP revisions, but overall the details were pretty positive. Consumer spending and business investment were a little stronger than previously reported, while the impact on the headline was dampened by a larger inventory drawdown and weaker demand from abroad.
- Looking ahead to the second quarter, the more important piece of data this week is the April personal income and spending numbers, which will be released tomorrow. Retail sales were flat in April, but the monthly PCE numbers include spending on services, which we expect to continue to ramp up as more Americans are fully vaccinated and local restrictions are eased. So far, growth in Q2 is tracking more than 10% annualized, driven by another round of double-digit growth for consumer spending. Tomorrow’s data will firm up expectations on that score.
