US: Economy continues to plow ahead, despite modest contraction in Q1 GDP – Wells Fargo

A new estimate of US Q1 GDP growth revised the original contraction of 1.4% to 1.5%. According to analysts at Wells Fargo, the economy continues to plow ahead, despite the modest contraction in real GDP growth observed during the first quarter.

Key Quotes: 

“Revised data that were released this morning showed that U.S. real GDP contracted at an annualized rate of 1.5% in Q1-2022. The outturn represents a slight downward revision to the “advance” estimate of -1.4% that was reported last month. 

“The revised data continue to show that two volatile spending components, namely inventories and net exports, were largely responsible for the contraction in real GDP that occurred in the first quarter. Specifically, the downshift in stock building in Q1 subtracted 1.1 percentage points off the overall rate of GDP growth while net exports made a negative contribution to growth that was worth 3.2 percentage points.”

“Today's release also gave us the first look at real gross domestic income (GDI) in Q1-2022. In theory, growth in GDI should be identical to growth in GDP. In practice, however, the two measures are rarely identical due to data errors and omissions. In that regard, real GDI grew at an annualized rate of 2.1% in Q1. This growth in the income side of the national income and product accounts (NIPA) is more in line with the “core” parts of the spending side.”

“Real personal consumption expenditures grew at an annualized rate of 3.1% in Q1 while fixed investment spending rose 6.8%. In short, the economy continues to plow ahead, despite the modest contraction in real GDP growth in the first quarter.”