Additional data gathered in May indicates that the government's first estimate of the U.S. gross domestic product was a pretty good one. Its first revision provided the same 1.8% annualized growth rate initially projected in April, according to the Bureau of Economic Analysis. So unlike most times when GDP is revised, there isn't much to explain about what changed. However, a few components within the calculation did shift, even though the headline number was not revised.

As a reminder, here's the chart:

gdp 2011-q1.png

Obviously, this looks identical to the chart from April, since GDP was not revised. If you want to get very technical, the growth rate was slightly different: in April it was rounded up to 1.8% from 1.75%, but the new revision revises it down to 1.8% from 1.83%. So growth was actually slightly better than we thought.

As for GDP's components, let's get the easy ones out of the way first: net exports and government spending both had virtually identical contributions to growth as was estimated in April. The dollar value of exports was a bit higher than we thought, but since imports were also proportionally higher the contribution of net exports did not change. From the fourth quarter, net exports remained flat. Government spending was pretty accurately estimated the first time around. It held growth back by shrinking at a seasonally adjusted, annualized rate of $35 billion.

Consumer spending didn't fare as well as first estimated. It was about $13 billion less than projected in April, on a seasonally adjusted, annualized basis. The difference came mostly from fewer goods being purchased than thought. Personal consumption overall still grew, however, growing at the rate of $51 billion.

Luckily, business investment made up for that slack. It was nearly $16 billion stronger than initially projected, on a seasonally adjusted, annualized basis. This was due in large part to more inventory growth than anticipated, but additional investment in business structures also contributed more to GDP than first thought. Total private investment grew during the quarter at the rate of $52 billion. 

There aren't a lot of revelations to take away from this new revision to growth, since it matched the first estimate. It is a little discouraging that consumer spending was weaker than we believed, however, since stronger demand is a key criterion businesses need to see in order to ramp up hiring. But firms' additional investing implies that their sentiment about the future was a little better than we thought.

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