Newsroom

June 28, 2016

Economy up 1.1% in final 1Q estimate

The U.S. economy grew an upwardly revised 1.1 percent in the first quarter of 2016, mainly from higher estimates for business investment and net exports, said NAFCU Chief Economist and Director of Research Curt Long. The Commerce Department released the final first-quarter estimate Tuesday.

"While first-quarter gross domestic product remained low despite the upward revision, there are a number of reasons to anticipate a modest rebound in the second quarter," Long noted in a NAFCU Macro Data Flash report. "Home sales, retail sales and vehicle sales were robust in April and May, and there is a possibility that the government's seasonal adjustment underestimated GDP in the first quarter, which would provide a boost to subsequent quarters."

The Commerce Department reported higher estimates for business investment (-4.5 percent from -6.2 percent), net exports (-$546.8 billion from -$561.2 billion) and government spending (1.3 percent from 1.2 percent). However, consumer spending (1.5 percent), residential investment (15.6 percent) and changes in private inventories ($68.3 billion) were revised downward.

Core personal consumption expenditure inflation (excluding food and energy), the Fed's preferred inflation metric, increased from 1.3 percent in the fourth quarter of 2015 to a downwardly revised 2 percent in the first quarter of 2016. Overall PCE inflation was 0.2 percent in the first quarter, down from 0.3 percent in the fourth quarter.

"Growth will likely be somewhat subdued, as job gains slowed recently, while the economy continues to face multiple headwinds – including a strong dollar, low energy prices, weak global conditions and financial market turmoil exacerbated by Brexit," Long said.