Karim writes:

    Q1 Real GDP was revised down just 0.1% to 2.4% but the underlying changes were more volatile:

  • Real Consumer Spending up to 3.4% from 3.2%
  • Capex up from 3% to 4.6%
  • Government consumption down to -4.9% from -4.1%
  • Inventory contribution down to 0.6% from 1%

Takeaway is underlying private demand was stronger than initially reported, government was more of a drag and inventories have more room to expand.

Yes, but note this:

The drag from government and inventories was partially offset by an upward revision to consumer spending, which rose at a 3.4 percent annual rate, up two tenths of a point from the government’s previous estimate. However, a cloud hung over that category, as most of the upward revision was due to higher sales of gasoline. Higher prices at the pump are a burden on consumers, leaving them less money to spend on other things.


After-tax corporate profits fell at a 1.9 percent annual rate in the quarter, the first decline in a year.

Optimism on late 2013 and 2014 growth (Rosengren speech yesterday) stems from government consumption turning from being a drag to neutral sometime in Q3 or Q4, leaving in place the underlying pace of private demand growth of about 3%.

Yes, the question being ‘leaving in place’, as govt spending feeds private sector sales, etc.

So the assumption is the private sector spending that’s been taking place will continue at that pace post tax hikes and sequesters. And note that growth in the credit driven spending (cars, appliances, housing) is showing at least hints of slowing.

Department of Labor reported 5 states didn’t complete their claims count last week due to the holiday, so the rise in claims to 354k to be taken with a grain of salt.

Yes, but here too are at least hints that claims bottomed a few weeks ago and have edged a bit higher since then, and that Non Farm Payrolls peaked in Feb, and if next weeks number prints at 150,000 the three month average is back down to around that level.

And, again, it’s the year end tax hikes and subsequent sequesters that are causing me to look for evidence of subsequent slowing.

This is notable for Italian (and European) growth. Eur10bn (mid-point of estimates below) is worth about a 0.5% add to GDP growth:

EU Recommends Removing Italy From Excessive-Deficit Procedure (Bloomberg) The European Commission recommended today lifting an excessive-deficit procedure against Italy after the government brought its budget shortfall within the European Union limit. “Our task is to respect our commitments with Europe and implement the program the parliament has given its vote of confidence on,” Italian Prime Minister Enrico Letta said. Ending the strict EU monitoring of Italian public spending may free up resources of as much as 12 billion euros, Regional Affairs Minister Graziano Delrio said in an interview with daily La Stampa May 27. “The closing of the procedure alone allows us to boost spending by between 7 and 10 billion euros, 12 billion euros in the most optimistic forecast,” Delrio said in the La Stampa interview.

Yes, this would be helpful, but a deceleration in expected US growth hurts Europe as well.

Initial Claims YTD:

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Nonfarm Payroll Change YTD:

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