GDP revision commentary

Key Take-Aways:

1) Headline GDP--Unrevised at +1.8%, But Important Compositional Revisions
2) Surprising Downward Revision to PCE, Points to Weaker Aggregate Demand
3) Upward Revision to Inventories Points to Lower Inventory Building Ahead
4) Net GDP Revision Points to a Slower Trajectory of Growth than Apparent Earlier

The Second Estimate of Q1-11 GDP revealed a 1.8% rate of gain unchanged from the 1.8% per the Advance release. While the headline Q1 GDP rate of change was unchanged from the Advance estimate there were important compositional revisions, which in combination point to a slower trajectory of growth than appears to be on track prior to this rlease. In other words, we are a bit disappointed with these data.

Guess who is most embarassed by this data. Hint: not Goldman.

For all of 2011 the FOMC anticipates growth of 3.1% to 3.3%, implying a growth rate of around 3-1/2% to 3-3/4% over the balance of the year. This now appears to be a bit optimistic. It now appears as if Q2-11 may post a gain of about 3%. For the FOMC's forecast to be realized we would need 4% growth in the second half.