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Brent Meyer |

Economist

Brent Meyer

Brent Meyer is a former economist of the Federal Reserve Bank of Cleveland.

07.07.08

Economic Trends

First Quarter Real GDP: Final Estimate

Brent Meyer

Real GDP increased at an annualized rate of 1.0 percent in the first quarter of 2008, according to the final estimate released by the BEA. The revision—which is 0.1 percentage point above the preliminary estimate and 0.4 percentage point above the advance release—was primarily due to upward adjustments to private investment and exports, which were mostly offset by a downward adjustment to inventories and an increase in imports (which enter as a negative in GDP accounting). Business fixed investment was actually revised up from a 2.5 percent decrease (annualized rate), according to the advance estimate, to a slight growth of 0.5 percent in the final release. Another encouraging sign was that, with each iteration, residential investment was revised up (albeit slightly).

Real GDP and Components, 2008:Q1 Preliminary Estimate

Quarterly change
(billions of 2000$)
Annualized percent change, last:
Quarter
Four quarters
Real GDP
27.9
1.0
2.5
Personal consumption
23.8
1.1
1.9
  Durables
−19.0
−6.0
0.5
  Nondurables
−1.0
−0.2
0.7
Services
36.5
3.1
2.8
Business fixed investment
1.9
0.5
6.7
  Equipment
0.6
0.2
3.5
  Structures
1.0
1.3
13.7
Residential investment
−29.3
−24.5
−20.7
Government spending
10.5
2.1
3.0
  National defense
7.1
5.6
5.8
Net exports
23.0
  Exports
19.6
5.5
9.5
  Imports
−3.4
−0.7
−0.1
Change in business inventories
−1.3

Source: Bureau of Economic Analysis.

An investigation into individual components’ contributions to the percentage change in real GDP shows us that inventory accumulation added 0.8 percentage point to real GDP growth in the advance report, but that this increase was almost completely revised away. Net exports were undoubtedly helped by the continued weakness in the dollar, as the final estimate for the first quarter had net exports adding 0.8 percentage point to real GDP growth, compared to just 0.2 percentage point in the advance estimate. Since the first quarter of 2000, net exports have subtracted 0.2 percentage point from growth, on average.

While personal consumption limped in at 1.1 percent in the first quarter, there is little evidence to suggest that will be the case in the second quarter. Real personal income increased 2.1 percent and 4.4 percent during the first two months of the second quarter. While the exact effect may be hard to measure, it seems that the fiscal stimulus rebates are giving at least a moderate boost to consumption. The rebates are also having a significant effect on personal income. Real personal income jumped up 19.0 percent in May. However, after subtracting out transfer payments—such as the stimulus checks—real personal income was virtually flat, falling 0.3 percent at an annualized rate.

Professional forecasters continue to expect below–trend growth over the next few quarters, before returning to near–trend growth by the end of 2009. Of the 48 forecasters surveyed by Blue Chip, 27 revised their 2008 forecast up from last month’s forecast. On the other hand, nearly half of the forecasters on the Blue Chip panel revised their 2009 GDP forecast down compared with their forecast a month ago.