Final Revision to First Quarter 2018 Gross Domestic Product

First quarter 2018 economic output was more moderate than earlier estimates suggested according to the Final Revision to Gross Domestic Product (GDP) from the Bureau of Economic Analysis (BEA).  Their latest calculation indicates an annualized growth rate of 2.0 percent, downwardly revised from 2.2 percent in the second tally and 2.3 percent in the initial estimate.  In sum, output slowed to start this year from the 2.9 percent pace at the end of 2017.

Inflation zapped some of the growth tally.  When GDP is released, it is done on a “real” basis; in other words, the BEA subtracts inflation from the tally.  This makes it easier to compare growth between various periods of time.  Their measure of inflation called the GDP price index was most recently revised upwardly to 2.2 percent from 1.9 percent, so more inflation needed to be subtracted.  However, inflation wasn’t the only change in the report.

Various components of GDP were revised.  Inventory growth and net exports were both lowered, each turning out to be negative in the quarter.  Consumer spending, while still positive, was less so than in the prior estimate.  But not all the revisions were lower.  Nonresidential fixed investment was upwardly revised as was residential investment; residential investment growth remained negative, just less so.  Government spending was also bumped upward.

First quarter 2018 GDP growth was reasonable, not stellar.  Consumers (the most influential segment of output) slowed their spending growth.  However, business investment was strong, possibly influenced by the corporate tax cut.  Also, inflation ticked higher, something seen in other inflation indicators Atlas watches.  Slower output and rising inflation leads to stagflation.  It’s too early to say for sure, but let’s all hope America is not headed in that direction.