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Gross Domestic Income drops, Investment higher, real final sales lower.

Superficially, the BEA reports GDP Declined 0.2 Percent in the first quarter of 2025. That is an upward revision of 0.1 percentage points (PP) that looks insignificant.

The actual details are more enlightening

Significant Changes

• Gross Domestic Income (GDI): -0.2 percent. GDI is not available in the advance report.
• Personal Consumption Expenditures (PCE): -0.41 PP
• Government Spending: +0.13 PP
• Gross Private Domestic Investment (GPDI): +0.38 PP
• Imports: -0.59 PP
• Change in Private Inventories (CIPI): +0.39 PP
• Real Final Sales: -0.40 PP

All of that adds up to a meaningless revision of +0.1 PP.

Change Synopsis

The upward revision in government spending accounts for all of the change. But that’s not significant.

The most significant change is to Real Final Sales, down 0.4 percentage points. RFS is the bottom line estimate for the economy. The rest is inventory adjustment (CIPI) that nets to zero over time.

From the fourth quarter of 2024, RFS was a whopping -2.9 percent. This will have a much bigger impact on the NBER’s recession determination than the top line report of -0.2 percent.

CIPI and RFS net to zero +- rounding errors.

The PCE revision (consumer spending) was -0.41 PP but Gross Private Domestic Investment rose 0.38 PP. This is a long-term excellent tradeoff, and the best part of the report.

From the fourth quarter of 2024, GPDI increased an amazing 24.4 percent, contributing 3.98 percentage points to GDP, an upward revision from 3.60 percentage points.

Last quarter GPDI contributed -1.03 percentage points to GDP.

Again this is an excellent long-term tradeoff.

Real GDP, Real Final Sales, Real GDI 2025 Q1Second Estimate

The upward revision from -0.3 percent to -0.2 percent is meaningless.

The huge revisions that fed that small change is important with short-term and long-term implications.

The Court Unanimously Strikes Down Trump’s Global Tariffs, Here’s Why

In case you missed it please see my post yesterday The Court Unanimously Strikes Down Trump’s Global Tariffs, Here’s Why

Reciprocal tariffs are dead. That does not mean all tariffs are dead. I will discuss Trump’s options for other tariffs later today.

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