The US Commerce Department reported yesterday that US real GDP growth in the first quarter of 2005 has been revised up to 3.8 percent, the same as the fourth quarter of 2004. Upward revisions were made to exports and residential fixed investment.
So much for the soft patch.
The Prudent Investor analysed the GDP data and concluded that the "structure of the growth pattern does not look bad". However, "recent economic indicators pointed to a slowdown in most sectors" ahead.
AP cites the response of Mark Zandi to the news.
"The economy is performing well. Sturdy growth with modest inflation," said Mark Zandi, chief economist at Economy.com. That is especially heartening, given the high energy prices. "It illustrates the resilience of the economy and the durability of the current economic expansion," he said... Zandi is among the economists who believe the economy is growing at a rate of 3.5 percent or better in the current April-June quarter. Others, however, predict it will end up under 3 percent.
Paul Kasriel of The Northern Trust Company, however, has a less optimistic take.
The first takeaway from today's report is that despite the upward revision, real GDP and real final sales growth are moderating... For example, year-over-year real GDP growth in Q1:2005 was 3.7% -- down from 5.0% in Q1:2004... The second takeaway is that the downward revision in the core PCE price annualized inflation from 2.2% in the preliminary report to 2.0% in the final report is less than meets the eye. To wit, most of the downward revision was due to a new lower estimate of the cost of "free" banking services. Excluding these kinds of freebies, which the core market-based PCE price index does, consumer inflation was revised up from 2.1% to 2.2%.
Regardless of these varied views, the FOMC is widely expected to hike interest rates again by 25 basis points today.