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April 30, 2007

On 1st Quarter GDP, Hold That Thought

From, the basics of the March report on personal income and outlays:

The personal income of Americans rose strongly again in March but their spending didn't meet expectations, while a key gauge of core inflation grew at a slower rate.

Personal income increased at a seasonally adjusted rate of 0.7% a second straight month, the Commerce Department said Monday. Originally, February income was seen up 0.6%.

March personal consumption grew 0.3% compared to the month before. Spending increased a revised 0.7% in February. Originally, February spending was seen 0.6% higher...

Spending on durable goods, those designed to last three years or longer, was unchanged in March, after falling 0.4% the previous month. Non-durable goods spending rose 1.0%, after a 0.4% climb in February. Spending on services decreased 0.1%, following a 1.1% increase in February.

That figure on services consumption is a bit eyebrow-arching, but overall it's hard to get too excited about this report, coming as it does on the heels of last Friday's advance figures for 1st quarter GDP. In case you haven't heard, it was not great:  Macro Man said Blah, Claus Vistesen said "ouch", and it hurt Dave at VoluntaryXchange to give the economy a "D" (to name just a few who were underwhelmed at the 1.3 percent annualized pace revealed by the Bureau of Economic Analysis).  William Polley has a nice round-up of other blogger comments, but I am with him in thinking that King at SCSU Scholars called it about right:

When this number is revised (and there will be two such revisions) the trade figure is the one that changes the most. So I expect this GDP estimate to be rather volatile to trade revisions.

The record does indeed show that the trade figures are apt to change as the numbers are re-crunched:




I wouldn't argue that the 1st quarter is likely to look anything other than weak when all is said and done, but I wouldn't carve that 1.3% in stone just yet.