U.S. GDP final revision shows economy fared a little better in Q1

The U.S. economy fared a little better (or less worse) in the first quarter than previously thought, though it still contracted slightly at a 0.2% annualized rate (revised from -0.7%). Final sales were revised higher (-0.6% from -1.1%), while inventory investment was marked up to a meaty $100 billion. Most expenditure areas were raised, though they still showed weakness. Consumer spending was bumped up modestly to 2.1%, though this is less than half the prior quarter's pace, and residential construction was marked up to a solid 6.4% rate.

In fact, the economy might not have contracted at all given possible faulty seasonal adjustment (that, if history is a guide, might have sliced 1½ percentage points from growth). Moreover, the slowing in consumer spending looks more like a pause that refreshes after the strongest spurt in nearly a decade rather than the start of a weakening trend. 

Thursday's May personal spending report is expected to show a strong rebound, led by decade-high auto sales, which should anchor a 3% gain in both personal consumption and real GDP in Q2. Growth should remain near 3% in the second half of the year as the dampening effects of a strong dollar and oil industry slump fade somewhat, while the push from stronger consumer spending and housing markets gathers steam, said BMO Capital Markets

Also note that the upward revision in Q1 growth looks to lift our estimate of 2015 annual growth a couple of pegs to 2.4%, in line with last year's respectable pace (given the rough start to both years), adds BMO Capital Markets