The nation's economy grew at a 1.8 percent annual rate in the first quarter, far slower than previous report for the three months ended March 31, the ""Bureau of Economic Analysis (BEA)"":http://www.bea.gov/newsreleases/national/gdp/2013/pdf/gdp1q13_3rd.pdf said Wednesday. Previous reports on the nation's Gross Domestic Product (GDP), based on incomplete data, had estimated growth at 2.4 percent, and economists surveyed by Bloomberg had expected the most recent report would confirm that growth rate.[IMAGE]
Along with the GDP report, BEA said corporate profits in the first quarter were $1.985 trillion, $26 billion from the previous estimate, but still down $28 billion from the fourth quarter. The last time corporate profits showed a quarter-over-quarter decline was in the first quarter of 2012. Corporate profits are considered a key indicator of employment trends.
Profits fell, according to BEA, for both financial and non-financial corporations. The quarterly drop in profits at financial corporations was fourth in the last five quarters.
The downward revision to GDP came amidst positive news about the economy. Home prices, according to the Case-Shiller Index released Tuesday, ""rose"":http://dsnews.comarticles/case-shiller-indices-post-record-monthly-gains-2013-06-25 at their fastest pace ever in April and consumer confidence, as reported by the Conference Board, increased for the third straight month.
GDP itself, the broadest measure of the economy, is the sum of consumer spending, investment and government spending, less net exports. It totaled $1.3725 trillion for the first quarter, according to BEA, down from the $1.375 trillion estimated a month.
BEA issues three GDP reports for each report. Wednesday's report was the third. The first second quarter report will be issued July 31.
In dollar terms, GDP rose $60.3 billion in the first quarter, down from the $84.7 billion increase reported a month ago. Most of the change came from a new estimate of personal consumption spending in the first quarter, which[COLUMN_BREAK]
according to Wednesday's report, increased $62 billion, down from the $76 billion increase reported in the second estimate of GDP.
Government spending, according to the latest data, was more of a drag on GDP than estimated a month ago, dropping $30 billion instead of the $26 billion reported at the end of May.
Private investment was slower than reported a month ago, dropping to $1.97 trillion from May's report of $1.99 trillion. Most of the change was due to a drop in inventory investment which fell $14 billion from the send GDP estimate to the third.
Residential fixed investment was reported as $399 billion in the third GDP report, up slightly from the $397 billion in the second report.
Still, the GDP growth--albeit less than previously reported--looked strong against the fourth quarter when the nation's economy grew an anemic 0.4 percent and meant the economy met and overcame two significant challenges: the end of the two-year payroll tax holiday as of January 1, costing most wage earners $1,000 for the entire year and, as of March 1, the beginning of the federal budget sequester which reduced federal spending.
The reduction in take-home pay didn't stop consumers. Even with the lower final estimate, personal consumption spending rose 2.6 percent in the first quarter. In the second GDP report issued in May, personal consumption was reported to have grown 3.4 percent in the first quarter.
The slowdown in government spending--and its impact on GDP--could be more pronounced in the second quarter as the first quarter data reflected only one month of the sequester cuts.
The personal consumption price index--an alternate measure of inflation watched closely by the Federal Reserve--showed a 1.2 percent inflation rate in the last year compared with 1.6 percent in the fourth quarter. The core inflation rate--excluding more volatile food and energy prices--was 1.3 percent in the first quarter, down from 1.5 percent in the fourth.
The inflation measures take on added significance as the Federal Reserve said it would look to two measures--the unemployment rate and the inflation rate--to determine when to raise interest rates and reduce its bond purchase program.
_Hear Mark Lieberman Friday on P.O.T.U.S. radio, Sirius-XM 124, at 6:20 am Eastern Time._