Gross Domestic Product (GDP) is the broadest measure of aggregate economic activity and encompasses every sector of the economy. Why Investors Care
| Released on 6/26/08 For Q1 Final 2008 | |||||||||||||||||||||||||
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Highlights
The final revisions to first quarter GDP matched expectations and showed the economy one tick further up in positive growth territory, clearly dodging recession. First quarter as GDP growth was revised up to an annualized 1.0 percent from the prior estimate of 0.9 percent. The markets had expected a revision to 1.0 percent. On the inflation front, the first quarter GDP price index was revised up marginally to an annualized 2.7 percent from the previous estimate of 2.6 percent. The market had forecast the first quarter revision to come in at 2.6 percent. Headline PCE inflation was nudged up to 3.6 percent from 3.5 percent while core PCE inflation was boosted to 2.3 percent from the prior estimate of 2.1 percent.
The bottom line is that GDP growth was solidly above a recession pace but inflation was picking up. The latest revisions really add no new news to the view that the economy is in mild stagflation.
Year-on-year, real GDP growth was unrevised at up 2.5 percent for the first quarter and unchanged from the fourth quarter pace. Year-on-year, the GDP price index was unrevised at up 2.2 percent in the first quarter and was down from up 2.6 percent in the prior quarter.
GDP growth for the first quarter was revised up to an annualized 0.9 percent, compared to the initial first quarter estimate of 0.6 percent. 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 at an annualized 2.6 percent, following the fourth quarter's 2.4 percent.
Real GDP Consensus Forecast for final Q1 08: +1.0 percent annual rate
Range: +0.9 to +1.2 percent annual rate
GDP price index Consensus Forecast for final Q1 08: +2.6 percent annual rate
Range: +2.6 to +2.6 percent annual rate
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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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