U.S. Q1 GDP growth’s third estimate remains unchanged, Q2 growth likely to fall sharply

The BEA’s third estimate for U.S. first quarter economic growth was unchanged at -5 percent quarter-on-quarter. The third estimate is based on more complete source data than were available for the earlier estimates. In the report released today, revisions to sub-components were small and widely countered each other, leaving the headline print unchanged. In particular, an upward revision to non-residential fixed investment was countered by revisions to private inventory investment. These revisions are not expected to offer any material new inflation, leaving the growth outlook for quarters ahead unchanged, said Barclays in a research report.

The reported fall for the first quarter GDP growth is likely just the tip of the iceberg. COVID-19-related disruptions started deepening only at the tail end of the first quarter, when stay-at-home orders were issued throughout the nation and non-essential businesses were shut down. Moreover, mechanically, March’s falls in activity saw more weight when calculating second quarter GDP growth.

“Furthermore, the April data in hand show a sharper fall in activity relative to March, pointing to a steep decline in growth in the second quarter. Our baseline forecast is that Q2 GDP growth will plummet 40% q/q saar, and our Q2 GDP tracker, which estimates the implications of incoming data for growth, is in that vicinity”, added Barclays.