Thursday, May 29, 2008
The Department of Commerce released the "preliminary" estimate for first quarter GDP indicating an improvement to a seasonally adjusted annualized growth rate of 0.9 percent.
Don't get too excited.
The 0.3 percentage point gain from last month's "advance" reading of 0.6 percent was driven by a gain of 0.6 percentage points due to a lower trade deficit combined with a 0.3 percentage point decline in private domestic investment largely due to a change in inventories as shown below.
Today's report is the second of three reports for economic growth during the first quarter - the "final" estimate will be released at the end of June.
The GDP price deflator, used to adjust "nominal" GDP to "real" GDP was unchanged from the advance estimate at 2.6 percent.
With soaring prices for both food and energy during the first quarter of the year, does anyone really believe that a 2.6 percent annualized rate of inflation is the right number to be used to calculate "inflation adjusted" growth?