Second revision notes US GDP decline worsening to -1.5% in first quarter

US gross domestic product shrank 1.5% in the first quarter of 2022 year-on-year, according to a second estimate by the Bureau of Economic Analysis (BEA), an agency linked to the US Department of Commerce, released this Thursday (26).

The first estimate was for a decline of 1.4%., a result well below expectations (which was 1.1% higher). Expectations faded again today, with the Refinitiv consensus suggesting the revision was for the better, down 1.3%.

The third GDP estimate will be released on June 29.

The BEA says the second estimate is based on more complete data than is available in the first, and that the larger decline “primarily reflects downward reviews of private equity and residential investment, which were partially offset by a review of consumer spending.”

The BEA reiterated that the decline in the first quarter of this year compared to the fourth quarter of 2021 was due to a resurgence of Covid-19 cases in the United States, due to the Omicron variable, and cuts to government aid payments related to the pandemic.

The result wasn’t too bad

In the first estimate, at the end of April, The market realized that the result was not as bad as it seemedAs the quarterly decline was primarily driven by a larger trade deficit, due to increased imports and slowing corporate inventories, consumption remained robust.

The fear was that the outcome might indicate a recession scenario and affect the Federal Reserve (Federal Reserve, US central bank) decision on interest rates. Together, the trade deficit and business inventories had a negative impact of about 4 percentage points on first-quarter GDP.

US GDP methodology

The methodology used by the BEA to calculate GDP growth on an annual basis, differs from that used by other countries in the world. The American method is to calculate the quarterly change with annual seasonal adjustment, and the resulting change is raised to the fourth power.

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