Thursday, May 31, 2012

The GDP Revision

The Commerce Department released its first revisions to the estimates for the first quarter's GDP this morning, and the news was not good: What had initially been reported last month as an annual growth rate of 2.2 percent was knocked down to 1.9 percent. This is after we saw 3.0 percent growth in the fourth quarter of 2011.

There were two basic culprits: Consumer spending, which was initially estimated to have increased at a rate of 2.9 percent, was revised downward to 2.7 percent. And the government revised upward its inflation estimate for the quarter for personal consumption expenditures, from 2.4 percent to 2.5 percent. So a little bit of what was first thought to have been economic growth is now seen as just prices rising.

At the same time, the Commerce Department released its first estimate of corporate profits for the first quarter, and that news was much better. Corporate pre-tax profits were up by $11.4 billion in the quarter, an increase of 13.2 percent.

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