Real gross domestic product was up at an annual rate of +2.3% for Q1-2018, which was slower than the +2.9% for Q4-2017. This was the advance report, relying on data estimates and economic modeling. For the next two months, the GDP data will be comprised of a greater amount of “hard” data. About five years of historical GDP data will be revised and released on July 27, 2018.
Our analysis of Q4-2017’s data included our discussion about the effects of tax law changes. First quarter GDP reports have been a problem for the Bureau of Economic Analysis for the past few years, often producing lower estimates for that period compared to other quarters. The department has been reviewing and updating its estimating procedures in the hopes of improving its reporting. Because companies and individuals, especially corporations, shifted expenses into 2017 and delayed revenue recognition to 2018 to take advantage of new tax rates, many key economic data series will be subject to larger than usual revision.
In general, the economy remains below post-WWII levels, a trend since the turn of this century. We much prefer using a year-to-year comparison that reduces the effects of quarter-to-quarter seasonality patterns. The other change we make is remove the effect of inventories. Q1-2018 was almost +2.9%, and after removing inventories was almost +2.7%.