Gross Domestic Product (GDP) is the broadest measure of aggregate economic activity and encompasses every sector of the economy. Why Investors Care
| Released on 5/29/08 For Q1 Preliminary 2008 | |||||||||||||||||||||||||
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Highlights
The economy still stayed out of recession in the first quarter as GDP growth was revised up to an annualized 0.9 percent, compared to the initial first quarter estimate of 0.6 percent and market expectations of a revision to 1.0 percent. There were no notable changes in the detail other than the cumulative effect of modestly higher overall growth. The first quarter gain is slightly stronger than the 0.6 percent rise seen for the fourth quarter.
The upward revision to the percent change in real GDP primarily reflected a downward revision to imports and upward revisions to nonresidential structures and to PCEs for nondurable goods that were partly offset by downward revisions to private inventory investment, to exports, and to PCE for services.
On the inflation front, the first quarter GDP price index was unrevised an annualized 2.6 percent, following the fourth quarter's 2.4 percent. The consensus had expected the first quarter revision to come in at 2.6 percent. Headline PCE inflation for the first quarter was unrevised from the initial estimate of 3.5 percent. Meanwhile core PCE inflation was revised down to 2.1 percent from the advance estimate of 2.2 percent.
The bottom line is that the economy is still essentially flat with inflation that is too high. The numbers still leave the Fed worrying more about inflation that it had counted on just a few months ago. First quarter revisions essentially matched expectations and there should be little reaction.
Year-on-year, real GDP growth held steady at up 2.5 percent in the first quarter. Year-on-year, the GDP price index edged down to up 2.2 percent in the first quarter from up 2.6 percent in the prior quarter.
Real GDP growth for the first quarter shows the economy just barely staying out of recession with an initial estimate of 0.6 percent annualized growth. The modest rise in real GDP reflected continued strong exports, a small rise in inventories, and continued healthy personal consumption of services. Weakness was seen in declines in durables and nondurables PCEs, nonresidential fixed investment, and in residential investment. The first quarter GDP price index firmed to an annualized 2.6 percent boost from the prior quarter's 2.4 percent. The headline PCE price index was still rather hot, rising an annualized 3.5 percent in the first quarter, while the core PCE price index growth rate eased to up 2.2 percent.
Real GDP Consensus Forecast for preliminary Q1 08: +1.0 percent annual rate
Range: +0.8 to +1.2 percent annual rate
GDP price index Consensus Forecast for preliminary Q1 08: +2.6 percent annual rate
Range: +2.2 to +2.6 percent annual rate
![[Chart]](chart.gif)
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Real GDP growth is always quoted at a quarterly annual rate. It measures how much the economy has grown over a three-month period. Quarterly growth rates are often volatile; consequently, economists also like to look at the year-over-year growth in GDP. The yearly changes tend to be more stable. |
![[Chart]](chart_1.gif)
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It is common to compare quarterly changes at annual rates in the GDP price index. These can be volatile, just like the quarterly swings in real GDP growth; as a result, the trend in inflation is better determined by year- over- year changes. |
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