Key GDP Revisions Q1: Consumption Revised Down, Business Investment Up, IP Investment Strong

By at 27 June, 2019, 1:06 pm

by Raymond J. Keating-

After the initial estimate, each quarter’s GDP report gets revised in subsequent months. Let’s compare key revisions from the just-released report on first quarter 2019 GDP growth to the original estimate released in late April.

First, real GDP growth in the first quarter has been revised down slightly, from 3.2 percent to 3.1 percent. That’s up from 2.2 percent in the fourth quarter 2018, but down from 4.4 percent in the second quarter 2018 and 3.4 percent in the third quarter.

Second, real personal consumption expenditures growth has been revised down from 1.2 percent to 0.9 percent. Consumer spending has slowed dramatically over the past two quarters, from 3.5 percent in the third quarter 2019 to 2.5 percent in the fourth quarter and to, again, 0.9 percent in the first quarter of this year.

Third, a positive revision came with growth in real nonresidential (i.e., business) investment, with growth initially estimated at 2.7 percent, and now revised up to 4.4 percent. Most noteworthy was the step up in growth regarding intellectual property products investment, from an initial estimate of 8.6 percent to the latest pegged at 12 percent.

While business investment has slowed over the past four quarters, intellectual property investment growth has remained robust. Indeed, intellectual property investment has been strong going back to the state of 2018.


       Growth in Real Intellectual Property

Products Investment

2018  Q1


2018  Q2


2018  Q3


2018  Q4


2019  Q1


Fourth, there was some improvement on the trade front in terms of real export growth in the first quarter, which went from an initial estimate of 3.7 percent to the latest at 5.4 percent.

Fifth, while there was some improvement in the revisions seen on imports, they still declined in the first quarter. The initial estimate pointed to real imports declining by 3.7 percent in the first quarter 2019, but that since been revised to a decline of 1.9 percent.

As a side note, when we get our first look at GDP for the second quarter of this year at the end of July, that report will also feature further updates going back to the first quarter of 2014.

While greater accuracy in terms of measuring our recent economic past is important, far more critical is where we are now and where the economy is headed. The best way to assure more robust growth than the economic under-performance we’ve been experiencing for at least a dozen years now is to turn the policy foundation in a clear, pro-entrepreneur, pro-private-investment, pro-growth direction, i.e., substantial and permanent tax and regulatory relief, free trade, sound money, and reined in government spending.

During the Trump administration, we’ve gotten tax and regulatory relief (with permanency and greater relief needed); free trade has been abandoned; federal spending continues to grow far too rapidly (for the current fiscal year 2019, federal outlays are projected to jump by a stunning 10.2 percent); and the Fed’s monetary policy has been moving in a positive direction, but with political intrusions raising questions.


Raymond J. Keating is chief economist for the Small Business & Entrepreneurship Council.

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