June 27, 2013
Ben Casselman at the Wall Street Journal wondered last month whether the economy was doing better than the GDP numbers suggested. By contrast, we learn today that even GDP hasn’t done as well as those GDP numbers suggested.
The latest from the Bureau of Economic Analysis indicates that the economy was smaller in the first three months of 2013 than previously reported. In May, BEA reported 2.4 percent economic growth in the first quarter of the year. Today, that figure was revised down to 1.8 percent.
Domestic demand for all newly-produced goods and services contributed 1.3 percentage points to GDP growth—revised down from 2.0 percentage points in April’s estimate. All categories were revised downward, with personal consumption contributing 1.8 percentage points rather than 2.2, fixed investment contributing 0.4 percentage points instead of 0.5, and government expenditures subtracting 0.9 percentage points down from a previously reported -0.8.
Foreign demand was revised down as well. Though exports had been thought to have added 0.4 percentage points to GDP growth, BEA now reports that exports fell, subtracting 0.2 percentage points.
At least one observer had previously pointed to the rebound in inventory accumulations as indicating “future consumer spending” but that rebound was much smaller than initially thought— adding only 0.6 percentage points to economic growth, rather than 1.0.
All in all, this is very bad news for how the economy performed in early 2013. Major historical revisions are on the way next month. Perhaps the second quarter numbers will look better than the first. The downward revisions to the first quarter data makes that a lower bar.
