Econoday Report: Gross Domestic Product 31, 2007

<%@ Language=VBScript %> Econoday Report: Gross Domestic Product 31, 2007

Gross Domestic Product

Definition
Gross Domestic Product (GDP) is the broadest measure of aggregate economic activity and encompasses every sector of the economy. Why Investors Care

Released on 5/31/07 For Q1 Preliminary 2007

Real GDP - Q/Q change - SAAR
Actual	0.6%
Consensus	0.8%
Consensus Range	0.5% to 1.3%
Previous	1.3 %

GDP price index - Q/Q change - SAAR
Actual	4.0%
Consensus	4.0%
Consensus Range	3.9% to 4.1%
Previous	4.0 %

Highlights
For the first revision, first quarter real GDP was revised down to an annualized 0.6 percent from the initial estimate of 1.3 percent. The revision was below the market consensus projection of a downward revision to 0.8 percent annualized growth. The first quarter pace followed a 2.5 percent annualized boost in the fourth quarter. The first quarter GDP price index was unrevised from the initial estimate of 4.0 percent and matched consensus expectations. The core PCE price index also was unrevised and came in at 2.2 percent. Today's report is essentially as expected and should have little impact on the markets.

The downward revision to the initial estimate for the first quarter is based on newly available data that showed a sharp reduction in business inventories and a jump in imports in March.

For the first quarter overall, the deceleration in growth primarily was due to a decline in net exports. Overall strength remains in personal consumption and nonresidential structures investment. Weakness is in net exports, residential investment, and inventory investment.

Year-on-year, real GDP fell to up 1.9 percent in the first quarter from 3.1 percent in the fourth quarter. Year-on-year, the GDP price index edged up to up 2.7 percent year from up 2.5 percent in the prior quarter. The core PCE deflator growth rate was unchanged at up 2.2 percent in the fourth quarter.

Today's report is essentially as expected and should have little impact on the markets. Additionally, most expect the economy to improve in the second quarter and the anemic growth in the first quarter has little meaning now for looking ahead.

Market Consensus Before Announcement
GDP slowed to an annualized 1.3 percent from the 2.5 percent pace in the fourth quarter. More recent data point to a downward revision. On the inflation front, the GDP price index jumped to 4.0 percent due to the impact of higher oil prices, following a 1.7 percent increase in the fourth quarter.

Real GDP Consensus Forecast for preliminary Q1 07: +0.8 percent annual rate
Range: +0.5 to +1.3 percent annual rate

GDP price index Consensus Forecast for preliminary Q1 07: +4.0 percent annual rate
Range: +3.9 to +4.1 percent annual rate

Trends

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.

It is common to compare quarterly changes at annual rates in the GDP deflator. 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.

Data Source: Haver Analytics

2007 Release Schedule

Released On: 1/31 2/28 3/29 4/27 5/31 6/28 7/27 8/30 9/27 10/31 11/29 12/20

Released For: Q4a Q4p Q4f Q1a Q1p Q1f Q2a Q2p Q2f Q3a Q3p Q3f