The third revision only added 0.1% to GDP, but even a slightly healthier private sector is relatively good news
First quarter economic activity was a little stronger than we thought. The third revision of GDP for the first three months of 2011 bumped up growth to 1.9%, compared to a previously estimated 1.8%. Although 0.1% isn't much to get excited about, as the recovery struggles it's certainly better news than if we had learned that the quarter was worse than projected. Although few components of GDP changed significantly, net exports were responsible for the better result.
First, here's the new chart, showing the slight change in Q1 GDP growth, based on the data from the Bureau of Economic Analysis:
You can see that this little revision isn't enough to make the first quarter compare more favorably to the couple prior. The U.S. economy experienced relatively weak growth.
Compared to the prior revision, net exports were stronger, however. They were previously estimated as subtracting 0.06% from GDP. Instead, government economists now say that exports exceeded imports, adding 0.14% to growth.
So why does that net 0.20% increase in GDP growth only equate to 0.1% in the headline number? Government spending declined by even more than we thought. It ended up shaving 1.20% off GDP growth, instead of the 1.07% projected in May. This was due almost entirely to state and local government spending cuts during the quarter.