The Commerce Department reported today that U.S. gross domestic product grew at a sluggish 1.8% annually adjusted rate in the first quarter of this year, down from last month’s estimate of 2.4%. Although the revised number is still a significant jump from the fourth quarter’s 0.4% growth rate, it’s still a fairly large revision and stands in contrast to a recent run of positive data. The biggest driver of the downward revision was in consumer spending, which was last reported growing at 3.4% before today’s 2.6% figure. Spending by individuals, called “personal consumption expenditures” in GDP figures, accounts for about two-thirds of GDP.
This lowish figure stands in contrast to recent positive data showing consumer resilience and optimism about the economy. One measure of consumer confidence, The Conference Board’s consumer confidence index, hit a five-year high yesterday thanks to continuing job growth and rises in home prices. Sales of new homes were at their highest level since July 2008, and the Case-Shiller index, which tracks home prices in 20 metropolitan areas, advanced 12% in the last year. A survey of consumers done by Goldman Sachs showed that “consumer spending intent,” which measures how much discretionary spending people intend to do in the next six months, also hit a post-recession high. This data, along with the consumer confidence data, is forward-looking, measuring both how consumers feel and their plans going forward. The GDP data, on the other hand, is a look back at the first quarter of the year. Hopefully the next big surprise is on the upside.