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Yesterday, I reported Real GDP Down 0.3 Percent, Real Final Sales Down 2.5 Percent, Inventories Soar

Front-running tariffs led to a collapse in real final sales, the bottom-line estimate of GDP

The St. Louis Fed data repository was seriously late yesterday in updating its databases with GDP data.

The data is now available and the lead chart is a new one.

Percentage Point Contributions to GDP 2025 Q1 Advance

• PCE Services: +1.10 PP
• PCE Goods: +0.11 PP
• Government: -0.25 PP
• Nonresidential Investment: +1.29 PP
• Residential Investment: +0.05
• CIPI: 2.25 PP
• Exports: +0.19
• Imports: -5.03

That totals to -0.29 which the BEA rounded to -0.3 percent.

Imports look ugly and they are. But imports don’t really subtract from GDP. The BEA subtracts imports to account for goods and services erroneously added to Personal Consumption Expenditures (PCE).

Real Final Sales (RFS) is the bottom line estimate of the economy. The difference between the reported headline number and RFS is Change In Private Inventory (CIPI) that nets to zero over time.

The outright terrible number in the report is RFS at -2.5 percent. (Baseline -0.29 minus 2.25 CIPI = -2.54 vs reported -2.50).

Those looking for something good can point to nonresidential investment that contributed 1.29 PP to the quarter.

And although April may show some more tariff front-running, we won’t see another 5 percent subtraction for imports.

Easy to Spin

It’s easy to spin this as better or worse than reported depending on a focus on fixed investment or real final sales, both distorted by tariffs.

But take a look at residential investment and PCE. Residential real estate is dead. And PCE goods was barely alive.

The consumer wasn’t actually blazing in Q1 with a combined PCE contribution of +1.21 PP, nearly all services.

Government contributed -0.25 PP and rates to be weak for the rest of the year.

What About Jobs?

Looking ahead, we rate to see pullbacks in government jobs.

And if ADP is any indication, there’s a huge slowing in the private sector as well.

ADP Employment Report Much Weaker than Expect

Yesterday, I commented ADP Employment Report Much Weaker than Expect, Large Employment Stalls

Economists expected 125,000 jobs. ADP reported 62,000 with negative revisions.

Businesses with 20-49 employees have been struggling since the beginning of 2024. We are now seeing a rapid deceleration of the largest employers.

Don’t put any faith in this, but The Initial GDPNow Nowcast for 2025 Q2 is 2.4 Percent

We don’t have any data reports for the second quarter yet. I think that is a snapback estimate based on imports and CIPI.

On Friday, we hear from the BLS on jobs. The Bloomberg economists’ consensus is +130,000.

If ADP is accurate, we might see something like 40,000.

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