Q1 GDP Revised Lower

(KNSI) – The Bureau of Economic Analysis released its second estimate for U.S. GDP at the start of the year. The revised figure is slightly worse than the initial estimate, -1.5% on an annualized basis versus -1.4% reported in April.

On a positive note, the consumer is still spending. The personal consumption expenditure category was revised upward to 3.1%. People are opening their wallets for goods and services equally. Consumer spending accounts for roughly two-thirds of the overall American economy.

Consumers are turning to credit to continue buying. The savings rate fell to prepandemic levels in the first quarter. Wage growth has not been able to keep up with inflation in recent months.

On the flip side, there were several downward revisions to offset the stronger consumer figures. Government spending is down significantly as fiscal stimulus efforts used to prop up the economy roll off. The housing market is seeing fewer transactions and that has put off homebuilders. Fixed residential investment was a lag, along with business inventories.

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