Real GDP revised down, inventories revised up

Real GDP was downwardly revised to 2.7% in the first quarter from a previously reported 3.0%. The main surprise in this report was in real PCE, which was downwardly revised to 3.0% from 3.5%.

Economic profits were upwardly revised to 8.0% (nonannualized) in the first quarter from 5.5% and have surged by 34.0% over the last year. The implied income estimate of real GDP was upwardly revised to 4.2% in the first quarter from 2.9%, putting this measure up 2.2% year-over-year (versus 2.4% on expenditure-based real GDP).

BOTTOM LINE

While the downward revision to real GDP combined with an upward revision to inventories is not an encouraging mix, we note that the implied income estimate of GDP was revised significantly higher in the first quarter on stronger corporate profits and personal income. Nevertheless, this report provides a lagged picture of the economy and we look for around 3½% real GDP growth for the quarter that will come to a close next week.

Source RDQ

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