From NAM: Q1 GDP revised upward to 0.8% gain; incomes grew faster than initial estimate
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The Commerce Department announced Friday an upward revision of its previous estimate of first-quarter GDP, to an 0.8% annualized rate, Bloomberg News reported, calling it “the smallest gain in a year.”
The department initially estimated 0.5% growth in the January-March period. Economists surveyed by Bloomberg had forecast a 0.9% economic gain. The story said Friday’s data did “little to alter views” of an economy that has had a “sluggish start” for three consecutive years, and the numbers “could portend a tougher slog in the second quarter as businesses work to continue to pare stockpiles.”
The data also included revisions to personal income in last year’s fourth quarter, now showing that “pay accelerated even more than previously estimated.” Wages and salaries rose $125.5 billion, the biggest quarterly gain in nearly two years and up from the $81.7 billion increase originally estimated.
The New York Times said that despite signs the economy is “picking up speed,” the “overall gains are still likely to fall short of what many experts — not to mention ordinary workers — would hope to see as the recovery nears the end of its seventh year.”
This underscores challenges Federal Reserve policymakers face in considering whether to raise interest rates at their June 14-15 meeting, or wait until later in the year. The Times, citing Friday’s Commerce Department data, reported that businesses remain hesitant to spend money, possibly as a result of “pressure on earnings after several years of expanding margins.” Corporate profits for the first quarter increased “just” 0.3%, after falling 7.8% in the final quarter of 2015.
In the NAM’s Shopfloor blog, Chief Economist Chad Moutray wrote that despite the government’s upward quarterly revision, “it is clear that the economy remained challenged,” with improvements in fixed income, inventories, and net exports “reducing the pace to which each was a drag on real GDP growth.”
The economy’s performance overall, he added, “has been disappointing through the first three months of 2016, extending the sluggishness seen at the end of 2015,” with consumers and businesses still “cautious” and the strong dollar and weak international demand constraining exports.