GDP Q1 Revision: Some Changes Worth Noting

By at 27 May, 2021, 1:49 pm


The second estimate of first quarter GDP from the U.S. Bureau of Economic Analysis saw no change in the reported topline growth rate – real GDP grew at 6.4 percent (seasonally adjusted annualized). But the report did offer changes to internals that are worth noting.

First, the good news.

Two key measures of investment were revised up. Real private fixed nonresidential investment (or business investment) growth was revised from 9.9 percent to 10.8 percent. Business investment, of course, is vital to economic growth now and in the future, and in the first quarter, it finally recovered the losses experienced as the pandemic hit.

Source: Federal Reserve Bank of St. Louis, FRED

In addition, residential investment was revised up from a real rate of 10.8 percent to 12.7 percent. Housing, of course, has been hot after the pandemic initially hit. And that’s been a positive story for small business, given that residential construction, for example, is overwhelmingly about small businesses.

Source: Federal Reserve Bank of St. Louis, FRED

Second, the bad news.

The decline in exports in the first quarter was worse than initially estimated. Growth in real exports was revised from an initial estimate of -1.1 percent to -2.9 percent.

Source: Federal Reserve Bank of St. Louis, FRED

As we look ahead to expanded vaccinations here and abroad, and a greater opening up of the economy, investment and trade will be vital for continued expansion. Policymakers need to realize this and adjust policy accordingly, such as reducing, not increasing, the tax and regulatory burdens on entrepreneurship, business and investment, and working to expand, not limit, business growth opportunities through global trade.

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



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