GDP and Durable Goods Pancake Growth

Real GDP in the first quarter was already negative, but the revisions just went from negative to bad, to atrocious. The first estimate was a 0.1% drop, but that was given a preliminary revision of a drop of 1.0%. And the final revision went to a truly dismal 2.9% drop. Bloomberg was looking for the final revision to drop to -1.8%, and this was worse than every single economist was looking for.

May’s durable goods reading was also a stinker. Be advised that durable goods reports are often the most volatile on a month-to-month basis because the report contains so many moving parts. Still, this is a key component of the U.S. production, and ultimately what helps to make up future GDP.

durable goods fell by 1.0% in May. The prior month was a gain of 0.8%, and Bloomberg was calling for a gain of 0.4% in May. So -1.0% rather than a gain of 0.4% — dismal. On an ex-transportation basis, the reading was not quite as bad at -0.1% (versus a consensus of a 0.3% gain). Ex-defense, durable goods were up by 0.6%.

Now, if you look at the real core number that is non-defense capital goods and excluding aircraft, then May’s reading would be a gain of 0.7%. Suddenly things do not sound too bad after all.

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