Major GDP Revision Shows First-Quarter Economic Growth Increased to 2% from Initially Reported 1.3%

The Commerce Department has recently reported a significant upward revision in the U.S. economy’s growth for the first quarter. The initial estimate of 1.3% has now been adjusted to 2% for the period between January and March. This data surpassed the Dow Jones consensus forecast of 1.4%. With the fourth quarter of 2022 showing a growth rate of 2.6%, this positive upward revision helps dispel concerns about an impending recession.

The Bureau of Economic Analysis attributes this revision to better-than-expected consumer expenditures and exports. Personal consumption expenditures increased by 4.2%, the highest quarterly pace since the second quarter of 2021. Additionally, exports rose by 7.8%, recovering from a 3.7% decline in the fourth quarter of 2022.

Inflationary pressures also received some positive news. Core PCE prices, which exclude food and energy, rose by 4.9% during this period, indicating a 0.1 percentage point downward revision. The all-times price index remained unchanged at 3.8%, as per the last estimate.

As inflation is a key concern for Federal Reserve policymakers, they have embarked on a series of rate increases to bring it back down to 2%. These actions aim to control an economy that experienced its highest inflation levels since the early 1980s in the summer of 2022.

The labor market has been a crucial focus for the Federal Reserve. Currently, there are approximately 1.7 job openings for each available worker, leading to upward pressure on wages. However, wages have not kept pace with inflation.

On another note, the Labor Department also released a separate report indicating that initial jobless claims fell to 239,000 for the week ending June 24. This represents a decline of 26,000 from the previous week and is lower than the estimated 264,000.