BEA First Estimate of Q1 GDP

This morning the BEA announced they estimate Q1 GDP at: +2.5%.

As you all know, the BEA provides three estimates for a previous quarter GDP, then update it again several years out. So don’t place a lot of weight in today’s estimate.  That being said, it is taken seriously by markets.

I estimated the BEA would today provide a 3% GDP estimate, but my estimate was and is 2%.  We’ll see how this plays out, but it would be reasonable to see the BEA gradually lower their Q1 estimate in the coming months based on the weaker data later in the quarter that will not yet have been baked-in.

The story with Q1 GDP seems to be that the consumer kept spending by virtue of lowering their savings rate (down to the 2% range). Inventories added to GDP but not as much as I thought they would.

Many of you probably downloaded my book (Greedometer 2.0) from amazon. In Chapter 5, there’s a section called The Happy Government. It’s a discussion about how terrible the BEA has been at first, second, and third estimates of Q3 GDP for the past 10 years. You may want to have another look at it.

I’m sticking with a -0.5% Q2 GDP estimate. That’s my estimate of reality — not what I think the BEA will say on July 31st.  To that end, the July 31st -first estimate- of Q2 GDP will include a revision to the BEA’s process of GDP estimates. Much has been made of this in the financial press recently. By some estimates, the US economy may instantly become 3% larger on July 31st due to inclusions of parts of the economy previously not included.  Won’t that be interesting if the BEA prints a +2.5% GDP estimate for Q2 GDP (+3% from a process change minus my 0.5% GDP estimate)?