There is no cleaner measurement of an underlying economy than the quarterly and annualized readings on gross domestic product. Unfortunately, the U.S. economic growth picture showed a revision down to 2.0% for the first-quarter U.S. GDP. It appears as though weak consumer spending, which makes up the majority of U.S. GDP, was weaker than had been expected.

Dow Jones (Wall Street Journal) and Reuters were both calling for the GDP revision to remain flat at the prior 2.2% growth.

The increase in real GDP in the first quarter reflected positive contributions from nonresidential fixed investment, personal consumption expenditures, exports, federal government spending and state and local government spending.

Household spending rose by 0.9% in the first quarter, revised down from the prior estimate of 1.0% growth. Business investment also looks to have restocked slower than had been expected, but business investment was actually the strongest going back to 2014, as companies are using their tax-cuts to their advantage.

Other notes on the final revision for the first quarter’s GDP report:

• Current-dollar GDP increased 4.2% ($206.0 billion) to $19.96 trillion.
• The price index for gross domestic purchases increased 2.7%.
• The PCE price index increased 2.5%, while the core (excluding food and energy prices) increased 2.3%.

While this is a disappointment in the GDP growth metrics, there are some seasonal issues that come into play during the first quarter of every year. It is also usually the case that GDP revisions matter less and less to the financial markets due to the notion that the data gets older and older. This data now reflects roughly 90 days ago and was first projected 60 days ago.

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