The Economy

Revised Data Show Q1 GDP Declined 0.7%

The Commerce Department initially estimated a 0.2% increase in the first quarter but economists are anticipating a pick-up in growth.
Katie Kuehner-HebertMay 29, 2015

U.S. gross domestic product actually shrunk 0.7% in the first quarter, instead of rising 0.2% as the government initially estimated, the U.S. Department of Commerce announced Friday.

“The GDP estimate released today is based on more complete source data than were available for the ‘advance’ estimate issued last month,” the agency explained in a news release. “With the second estimate for the first quarter, imports increased more and private inventory investment increased less than previously estimated.”

But many economists, including those at the Federal Reserve Bank of San Francisco, are skeptical about the government’s GDP number because they contend its seasonal adjustment is not fully stripping out seasonal patterns, leaving “residual” seasonality, according to Reuters.

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The Commerce Department has said it was aware of the potential problem and was working to minimize it.

Markit chief economist Chris Williamson told Reuters that the extent of the actual decline in the first quarter is “of little concern” because “survey evidence is already pointing to a second-quarter pick-up.”

Many economists are pointing to improved growth after a confluence of events abnormally harsh weather, a strong dollar and a West Coast port strike hurt GDP in the first quarter.

The Commerce Department said the decrease in real GDP in the first quarter was in contrast to an increase of 2.2% in the fourth quarter of 2014.

The price index for gross domestic purchases, fell 1.6% in the first quarter, a downward revision of 0.1 percentage point from the advance estimate. Excluding food and energy prices, the price index for gross domestic purchases increased 0.2%.

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