U.S. Data Pulse: 2nd Estimate 1Q US GDP: QSS data point to downward revisions to consumption

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U.S. Data Pulse: 2nd Estimate 1Q US GDP: QSS data point to downward revisions to consumption

UpdateM

QSS data point to downward revisions to 1Q consumption

and GDP

On Thursday, the BEA will release the 2nd estimate of 1Q GDP. We expect real GDP

growth to be revised down a tenth to 1.9% (q/q saar). The downward revision we expect

comes entirely from personal consumption, which we expect to be revised down from

1.6% to 1.4%.

There are two opposing forces affecting 1Q consumption: upward revisions to February

and March retail sales and the advance release of the Quarterly Services Survey (QSS),

which pointed to downward revisions to services. We expect the downward revisions to

services spending to outweigh upward revisions to goods, though the imperfect

relationship between QSS and consumption leaves some question as to the magnitude of

the revision. 1Q consumption growth had already slowed from last year's pace; downward

revision would indicate even more so that higher prices were weighing on consumer

purchasing power at the start of the year, even before the oil shock.

Upward revisions to goods consumption

February and March Exhibit 1: Retail control: Net revisions to Feb & March m/m

control group retail % change, pct pts.

sales were both Control Group Category Net revision (to Feb and March m/m changes)

Sporting Goods, Hobby, Book & Music Stores 2.4

revised up in the April Health & Personal Care Stores 0.5

Furniture & Home Furn & Electronics/Appliance Stores 0.5

release, with February Food & Beverage Stores 0.4

Nonstore Retailers 0.4

revised up from 0.6% Clothing & Accessory Stores 0.4

General Merchandise Stores 0.2

m/m to 0.9% m/m Miscellaneous Stores Retailers -0.9

and March from 0.7% Source: Census Bureau, Haver Analytics, Morgan Stanley Research

to 0.8%.