FREE NEWSLETTER: Econintersect sends a nightly newsletter highlighting news events of the day, and providing a summary of new articles posted on the website. Econintersect will not sell or pass your email address to others per our privacy policy. You can cancel this subscription at any time by selecting the unsubscribing link in the footer of each email.

posted on 29 May 2015

Second Estimate 1Q2015 GDP Revised Down to NEGATIVE 0.7%

Written by Doug Short and Steven Hansen

The second estimate of first quarter 2015 Real Gross Domestic Product (GDP) is now a negative 0.7%. This data point was +0.2% in the advance GDP estimate. The downward revision to the percent change in real GDP primarily reflected downward revision to private inventory and greater imports (which are deducted from GDP).

The market expected:

Seasonally Adjusted Quarter-over-Quarter Change at annual rate Consensus Range Consensus Advance Actual 2nd Estimate Actual
Real GDP -1.0 % to -0.2 % -0.8 % 0.2 % -0.7 %
GDP price index -0.1 % to -0.1 % -0.1 % -0.1 % -0.1%

Headline GDP is calculated by annualizing one quarter's data against the previous quarters data (and the previous quarter was strong in this instance). A better method would be to look at growth compared to the same quarter one year ago. For 1Q2015, the year-over-year growth is 2.7% - up from 4Q2014's 2.4% year-over-year growth. So one might say that GDP growth accelerated 0.3%. The year-over-year acceleration adds fuel to the fire that there is a methodology problem with determining first quarter GDP.

Real GDP Expressed As Year-over-Year Change

This second estimate released today is based on more complete source data than were available for the "advance" estimate issued last month. (See caveats below.)

Real GDP is inflation adjusted and annualized and per capita GDP has now recovered from the values before the Great Recession.

Real GDP per Capita

The table below compares the 4Q2014 third estimate of GDP (Table 1.1.2) with the advance / second estimate of 1Q2015 GDP which shows:

  • consumption for goods and services declined.
  • trade balance worsened
  • there was an inventory growth adding 0.3% to GDP;
  • fixed investment growth was declined;
  • government lack of spending improved but remains a headwind to GDP.

The arrows in the table below highlight significant differences between 1Q2015 advance estimate and this 1Q2015 second estimate (green is good influence, and red is a negative influence).

[click on graphic below to enlarge]

What the BEA says about the second estimate of 1Q2015 GDP:

Real gross domestic product -- the value of the production of goods and services in the United States, adjusted for price changes -- decreased at an annual rate of 0.7 percent in the first quarter of 2015, according to the "second" estimate released by the Bureau of Economic Analysis. In the fourth quarter, real GDP increased 2.2 percent.

The decrease in real GDP in the first quarter primarily reflected negative contributions from exports, nonresidential fixed investment, and state and local government spending that were partly offset by positive contributions from personal consumption expenditures (PCE), private inventory investment, and residential fixed investment. Imports, which are a subtraction in the calculation of GDP, increased.

Inflation continues to moderate as the "deflator" which adjusts the current value GDP to a "real" comparable value continues to moderate. The following compares the GDP deflator to the Consumer Price Index:

BLS tabulation of the changes to 1Q2015 GDP:

The second estimate of the first-quarter percent change in real GDP is 0.9 percentage point, or $40.7 billion, less than the advance estimate issued last month, primarily reflecting an upward revision to imports and downward revisions to private inventory investment and to personal consumption expenditures that were partly offset by an upward revision to residential fixed investment.

Overview Analysis:

Here is a look at Quarterly GDP since Q2 1947. Prior to 1947, GDP was calculated annually. To be more precise, the chart shows is the annualized percent change from the preceding quarter in Real (inflation-adjusted) Gross Domestic Product. We've also included recessions, which are determined by the National Bureau of Economic Research (NBER). Also illustrated are the 3.26% average (arithmetic mean) and the 10-year moving average, currently at 1.48 percent.

Note: The headline -0.7% GDP is -0.749% at three decimal places. The callout in chart above is rounded to two decimal places.

Here is a log-scale chart of real GDP with an exponential regression, which helps us understand growth cycles since the 1947 inception of quarterly GDP. The latest number puts us 14.3% below trend, the largest negative spread in the history of this series.

A particularly telling representation of slowing growth in the US economy is the year-over-year rate of change.

Click to View

In summary, the Q1 GDP Advance Estimate of -0.7 percent was about what mainstream economic estimated.

And for a bit of political trivia, here is a look at GDP by party in control of the White House and Congress.

In summary, the Q4 GDP Second Estimate of 2.2 percent was within the forecasts of most mainstream economists.

The chart below is a way to visualize real GDP change since 2007. The chart uses a stacked column chart to segment the four major components of GDP with a dashed line overlay to show the sum of the four, which is real GDP itself. As the analysis clear shows, personal consumption is key factor in GDP mathematics.

Click to View

Caveats on the Use of Gross Domestic Product (GDP)

GDP is market value of all final goods and services produced within the USA where money is used in the transaction - and it is expressed as an annualized number. GDP = private consumption + gross investment + government spending + (exports − imports), or GDP = C + I + G + (X - M). GDP counts monetary expenditures. It is designed to count value added so that goods are not counted over and over as they move through the manufacture - wholesale - retail chain.

The vernacular relating to the different GDP releases:

"Advance" estimates, based on source data that are incomplete or subject to further revision by the source agency, are released near the end of the first month after the end of the quarter; as more detailed and more comprehensive data become available, "second" and "third" estimates are released near the end of the second and third months, respectively. The "latest" estimates reflect the results of both annual and comprehensive revisions.

Consider that GDP includes the costs of suing your neighbor or McDonald's for hot coffee spilled in your crotch, plastic surgery or cancer treatment, buying a new aircraft carrier for the military, or even the replacement of your house if it burns down - yet little of these activities is real economic growth.

GDP does not include include home costs (other than the new home purchase price even though mortgaged up the kazoo), interest rates, bank charges, or the money spent buying anything used.

It does not measure wealth, disposable income, or employment.

In short, GDP does not measure the change of the economic environment for Joe Sixpack in 1970, and Joe Sixpack's kid, yet pundits continuously compare GDP across time periods.

Although there always will be some correlation between all economic pulse points, GDP does not measure the economic elements that directly impact the quality of life of its citizens.

Related Articles

Old Analysis Blog

New Analysis Blog

Posts on GDP Posts on GDP

>>>>> Scroll down to view and make comments <<<<<<

Permanent link to most recent post on this topic

Click here for Historical Releases Listing

Make a Comment

Econintersect wants your comments, data and opinion on the articles posted.  As the internet is a "war zone" of trolls, hackers and spammers - Econintersect must balance its defences against ease of commenting.  We have joined with Livefyre to manage our comment streams.

To comment, using Livefyre just click the "Sign In" button at the top-left corner of the comment box below. You can create a commenting account using your favorite social network such as Twitter, Facebook, Google+, LinkedIn or Open ID - or open a Livefyre account using your email address.

You can also comment using Facebook directly using he comment block below.

Econintersect Economic Releases


Print this page or create a PDF file of this page
Print Friendly and PDF

The growing use of ad blocking software is creating a shortfall in covering our fixed expenses. Please consider a donation to Econintersect to allow continuing output of quality and balanced financial and economic news and analysis.

Take a look at what is going on inside of
Main Home
Analysis Blog
Comments on Feyerabend’s ‘Against Method’, Part III
Taking a Wrench to Healthcare
News Blog
Baby Remarkably Survives Being Born With Heart Beating Outside Her Chest
October 2016 Conference Board Consumer Confidence Declines
Richmond Fed Manufacturing Survey Remains In Contraction In October 2016.
October 2016 Chemical Activity Barometer Continues to Signal Improving Economic Growth
Case-Shiller Home Price Index August 2016 Year-over-Year Rate of Growth Marginally Improves
Russia Falls Into Old Habits
Infographic Of The Day: Commodity Update, Is The Summer Slump Over
Early Headlines: Asia Stocks Mixed, Oil Mixed, Voting Fraud, Pres. Forecast Little Changed, CETA Not Dead, Generous Iraqis, Terrorists In Pakistan, Duterte Wants Divorce From US And More
October 24, 2016 Weather and Climate Report - La Nina / El Nino?
Most Read Articles Last Week Ending 22 October
Londoners Most Uneasy About Chatting To Strangers
Average Gasoline Prices for Week Ending 24 October 2016 Now Higher Than One Year Ago
Earnings And Economic Reports: Week Starting 24 October 2016
Investing Blog
Slow Motion Torture
The Week Ahead: How Long For This Trading Range?
Opinion Blog
What Triggers Collapse?
The Beer Goggles Stock Market
Precious Metals Blog
Preparing For Post-Election Social Unrest
Live Markets
25Oct2016 Market Close: US Stock Market Indexes Closed Down Fractionally, Investors Remain Concerned With Friday's Fed Rate Change, Crude And US Dollar Down, Gold Up
Amazon Books & More

.... and keep up with economic news using our dynamic economic newspapers with the largest international coverage on the internet
Asia / Pacific
Middle East / Africa
USA Government

Crowdfunding ....



Analysis Blog
News Blog
Investing Blog
Opinion Blog
Precious Metals Blog
Markets Blog
Video of the Day


Asia / Pacific
Middle East / Africa
USA Government

RSS Feeds / Social Media

Combined Econintersect Feed

Free Newsletter

Marketplace - Books & More

Economic Forecast

Content Contribution



  Top Economics Site Contributor TalkMarkets Contributor Finance Blogs Free PageRank Checker Active Search Results Google+

This Web Page by Steven Hansen ---- Copyright 2010 - 2016 Econintersect LLC - all rights reserved