BEA Revises First Quarter 2020 GDP Contraction Downward To -5.06%

In their second estimate of the US GDP for the first quarter of 2020, the Bureau of Economic Analysis (BEA) reported that the US economy was contracting at a -5.06% annual rate, down -0.27 percentage points (pp) from their previous estimate and down -7.18pp from the prior quarter.

The overall downward revision in the headline number was in spite of a +0.57pp upward revision to their previous consumer spending estimate. The largest change for this reporting cycle was a -0.90pp downward revision to inventories. Since inventories are not reflected in the BEA's own 'bottom line' Real Final Sales, that number was revised upward +0.63pp to a somewhat better -3.63% contraction. The other line item revisions were not material.

Annualized household disposable income was revised $100 higher than in the previous report, and the household savings rate was reported to be 9.6%, unchanged from the previous report.

For this estimate the BEA assumed an effective annualized deflator of 1.61%. During the same quarter the inflation recorded by the Bureau of Labor Statistics (BLS) in their CPI-U index was much lower at -0.76%. Over estimating inflation results in pessimistic growth rates, and if the BEA's nominal data was deflated using CPI-U inflation information the headline growth number would have been -2.77%.

Among the notable items in the report :

-- Consumer spending for goods was reported to be growing at a 0.06% rate, up 0.33pp from the previous estimate and down -0.06pp from the prior quarter.

-- The contribution to the headline from consumer spending on services was reported to be -4.75%, up 0.24pp from the previous report and down -5.87pp from the prior quarter. The combined consumer contribution to the headline number was -4.69%, up 0.57pp from the previous report.

-- The headline contribution for commercial/private fixed investments was revised to -0.41%, up 0.02pp from the previous report and down -0.32pp from the prior quarter.

-- Inventories subtracted -1.43% from the headline number, down -0.90pp from the previous report and down -0.45pp from the prior quarter. It is important to remember that the BEA's inventory numbers are exceptionally noisy (and susceptible to significant distortions/anomalies caused by commodity pricing or currency swings) while ultimately representing a zero reverting (and long term essentially zero sum) series.

-- The contribution to the headline from governmental spending was revised to 0.15%, up 0.02pp from the previous report and down -0.29pp from the prior quarter.

-- The contribution from exports was revised to -1.02%, unchanged from the previous report and down -1.26pp from the prior quarter.

-- Imports added 2.34% annualized 'growth' to the headline number, up 0.02pp from the previous report and up 1.07pp from the prior quarter. Foreign trade contributed a net 1.32pp to the headline number.

-- The annualized growth in the 'real final sales of domestic product' was revised to -3.63%, up 0.63pp from the previous report and down -6.73pp from the prior quarter. This is the BEA's 'bottom line' measurement of the economy (and it excludes the inventory data).

-- As mentioned above, real per-capita annualized disposable income was revised $100 higher than in the previous estimate. The annualized household savings rate was 9.6% (unchanged from the previous report). In the 47 quarters since 2Q-2008 the cumulative annualized growth rate for real per-capita disposable income has been 1.47%.

1 2 3
View single page >> |

Disclosure: None.

How did you like this article? Let us know so we can better customize your reading experience. Users' ratings are only visible to themselves.

Comments

Leave a comment to automatically be entered into our contest to win a free Echo Show.