Technical Review

The Economy Is Slowing

The second estimate for first quarter GDP was revised down from 1.6% to 1.3%. As in the first report GDP was held down by an increase in imports (-0.9%) and decrease in inventories (-0.5%). As I’ve discussed imports reflect demand that is satisfied by production overseas, which is why it is subtracted from Domestic Production. A drop in inventories lowers GDP in the current quarter, but often lifts future GDP when inventories are replenished. Absent these two factors GDP growth would have been 2.7%, double the 1.3% reported. Normally, focusing attention on data that is far in the rear...

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