Gross Domestic Product (GDP) is the broadest measure of aggregate economic activity and encompasses every sector of the economy. Why Investors Care
| Released on 6/28/07 For Q1 Final 2007 | |||||||||||||||||||||||||
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Highlights
For the final revision, first quarter real GDP was revised up incrementally to an annualized 0.7 percent from the previous estimate of 0.6 percent. The revision was marginally below the market consensus projection for an upward 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 revised up to 4.2 percent from the prior estimate of 4.0 percent. The consensus had expected no change in the estimate for the GDP price index. The core PCE price index also was revised up to 2.4 percent for the first quarter, compared to the prior estimate of 2.2 percent for the first quarter. The modest upward revision to real GDP was primarily due to an increase in the estimate for exports. The slowing in GDP growth from the fourth quarter to the first quarter primarily reflected a drop in net exports.
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 rose to up 2.8 percent year from up 2.5 percent in the prior quarter. The core PCE deflator growth rate edged up to 2.3 percent year-on-year from up 2.2 percent in the fourth quarter.
Today's report has the GDP numbers close to market estimates. That and the fact that first quarter GDP is old news means that the markets will be focusing on other events today - including initial claims which declined and reflected continuing tight labor markets. Notably, everyone will be waiting for this afternoon's FOMC statement.
Last month, GDP for first quarter real GDP was revised down to an annualized 0.6 percent from the initial estimate of 1.3 percent. 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. For the final revision to the first quarter (until annual revisions), markets are expecting a small upward revision. However, the flat first quarter is now old news as most are expecting second quarter growth in excess of 3 percent.
Real GDP Consensus Forecast for final Q1 07: +0.8 percent annual rate
Range: +0.5 to +1.0 percent annual rate
GDP price index Consensus Forecast for final Q1 07: +4.0 percent annual rate
Range: +4.0 to +4.0 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 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. |
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