1Q24 GDP: Final Cut, Moving Parts
The final estimate on 1Q24 GDP at +1.4% sees a leg down in PCE, which dipped to +1.5% from +2.0% in the 2nd estimate after starting at +2.5 in the 1st est.
Economist team assembled for discussion of debate topics.
The headline GDP of +1.4% is the lowest since the -0.6% of 2Q22 with the PCE dip to +1.5%, which was the key driver as PCE dipped another -0.5% from the second estimate of +2.0% which for its part was a decline of -0.5% from the advance estimate of +2.5%.
Fixed investment under the GPDI heading stayed solid and rose to +4.4% for a material move up from 4Q24 but below 3Q23 and 2Q23 with Residential the biggest driver followed by Intellectual Property Products and Structures.
The price index in 1Q24 was revised back up from +3.0% to the earlier advanced estimate of +3.1% for headline and to +3.7% for core as that side of the news flow stays stubborn ahead of the May PCE price index release tomorrow.
The routine distortion of trade deficits and private inventories combined for a total haircut to GDP contribution of -1.07%.
The above chart updates the final deltas for the third and final estimates of 1Q24 (see links at the bottom for the 1Q24 and 4Q23 flow of deltas and details of line items).
As we have covered in the past, the most important line is PCE for obvious reasons given its combination of the GDP share (68% for 1Q24). It is hard to have a recession without a negative PCE line even if the GPDI line and Government spending are also a big source of support in this expansion cycle.
Construction and investment programs and the full range of infrastructure and various private-public tag teams have put a lot of numbers on the board (see 1Q24 GDP: Looking into the Investment Layers 4-25-24). While various constituencies have their own views on the value of CHIPS, IRA, etc., in the scheme of economic value, the measurement is the measurement. Those are facts to spin, but you need to at least start with the facts of the flowing dollars.
What comes next will get kicked around in the election process around taxes, tariffs, government budgets and the sustainability of the payroll growth trends. The FOMC is no small factor in this picture as well with the economics of investment and capex programs on the line in the face of so much rhetoric on tariffs (see Income Taxes for Tariffs: Dollars to Donuts 6-14-24, Trade Flows: More Clarity Needed to Handicap Major Trade Risks 6-11-24). It will be an interesting evening for what gets asked and what is said (and not asked and not stated).
The above chart updates the running GDP and major line item histories for PCE and GPDI for a frame of reference. We include the quarters from the ZIRP period of 1Q21 across the impressive post-COVID rebound numbers of 2021. We then move across the inflation spike and tightening cycle and into the period of wages playing catch-up alongside record payroll counts that flow into PCE (and stubborn inflation).
The use (and misuse) of economic numbers will be in for some “Gumby the Economist” bending in the debate tonight. Overall growth, trends in consumer activity, private sector investment in the nation (GPDI), and government spending priorities will most likely come with more adjectives than numbers. The conceptual side of the analysis will take some partisan abuse from both sides. The self-praise on “greatest” from both sides (“greatest ever ever” in Trump’s case) should be taken with a grain of salt. After all, the 1980s and 1990s actually did happen. Starting the clock in the year 2000 makes it easier to brag. Reagan and Clinton numbers are much better with the exception of payroll adds.
See also:
1Q24 GDP: Second Estimate, Moving Parts 5-30-24
1Q24 GDP: Looking into the Investment Layers 4-25-24
1Q24: Too Much Drama 4-25-24
4Q23 GDP: Final Cut, Moving Parts 3-28-24
4Q23 GDP: Second Estimate, Moving Parts 2-28-24
Lou Albano as VP? He probably knows the "buyer pays" on tariffs.
The WWE should get rights to this evening. Certain to be worth the money.