Bad news. Or maybe it’s good news to the extent slower growth relieves some of the upward pressure on long-end Treasury yields.
Either way, the personal consumption component of Q1 US GDP was revised meaningfully lower in the second estimate released on Thursday.
As initially reported, consumer spending grew at a 1.8% annualized rate during the first three months of 2025. That already counted as a sharp deceleration. The BEA said Thursday the pace was probably closer to 1.2%. That’s a veritable brake slam versus Q4’s pace.
Note that consensus expected only a marginal downward revision from the advance read (from 1.8% to 1.7%).
Is this a big deal? Well, not really. It’s old news. But it does suggest the sentiment drag (i.e., the psychological overhang) from looming tariffs and generalized macro uncertainty pressured spending even more than initially thought over the first three months of the year.
Thursday’s BEA release also came with the first estimate of Q1 GDI. As a reminder, the NBER takes the average of GDI and GDP into account when making determinations about recession and cycle dating.
The figure gives you some context. Q1’s decline on that key metric was the first since the pandemic.
Still, and as the chart header suggests, the US economy enjoys the benefit of the doubt given the aberrational impact of net trade on the Q1 growth tally. Until the labor market rolls over, or exhibits an inclination to decelerate meaningfully, no one’s going to panic.
Speaking of the labor market, initial claims printed 240,000 in Thursday’s update. That was the highest in four weeks and topped every estimate in Bloomberg’s survey.
