First Quarter GDP Revised Down Again

Washington, DC, June 25, 2010–The Commerce Department revised down for the second time its estimate of economic growth in the first three months of 2010, now seeing 2.7% annualized growth.

The department had initially said the economy grew 3.2% from January to March, then said it had grown 3%.

The revisions to this final reading on first-quarter GDP only highlighted the unbalanced nature of growth as consumer spending was revised lower.

Final sales, which exclude inventories, increased at a 0.8% annual pace, revised down from 1.4%.

The downward revision was a surprise. Economists had been expecting no revision in the third estimate.

Growth in the first three months of the year decelerated from the 5.6% expansion in the fourth quarter of 2009.

Economists are forecasting stronger growth — about 3.8% on an annualized basis — in the second quarter ending June 30. But big questions remain about prospects for economic growth during the second half of the year.

The revisions to first-quarter GDP were in two major areas: consumer spending and trade.

Investments in housing shrank at a 10.3% annual rate. Residential investments subtracted 0.2 of a percentage point from GDP growth.

Exports rose 11.3%. Imports increased 14.8%. Net exports reduced growth by 0.8 of a percentage point.