5 Points on Q1 GDP Revisions

By at 26 May, 2022, 4:48 pm

by Raymond J. Keating –

The second estimate on first quarter 2022 GDP offered five changes worth highlighting as compared to the initial report.

● First, the decline in real GDP (seasonally adjusted annual rate) was revised down, from -1.4 percent to -1.5 percent. So, growth was just a tad worse than originally thought.

● Second, the decline in private inventories was larger than originally estimated, with the percentage point contribution going toward the overall change in real GDP from the change in inventories moving from -0.84 points to -1.09 points. As we’ve noted before, inventory measures are temporary or transitory, not reflecting long-term investment.

● Third, growth in residential investment (housing) was revised down from 2.1 percent to a mere 0.4 percent.

● Fourth, there was a mixed story on the business (nonresidential) investment front. While real nonresidential investment growth of 9.2 percent remained unchanged, within that category, investment in structures originally was estimated at -0.9 percent for the first quarter, but was downgraded to -3.6 percent. However, growth in real intellectual property investment was revised up from 8.1 percent to 11.6 percent.

● Finally, real personal consumption expenditure growth was revised up from 2.7 percent to 3.1 percent.

The takeaways on this report don’t really change from our look at the initial estimates, including that policymaking desperately needs to shift in a pro-growth direction, that is, substantive and permanent tax and regulatory relief, advancing free trade, restraining government spending, and a Fed focused on a sound dollar are necessary.

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


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