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MNI DATA ANALYSIS: US 1Q GDP Revised Down To +2.0%>

--Downward Adjustments To PCE, Inv, Trade, Stronger Prices Key Factors 
--Core PCE Price Index Unrevised At +2.3%; Y/Y Still +1.6%
--Initial Jobless Claims Rose 9,000 To 227,000 In June 23 Week
By Kevin Kastner and Holly Stokes
     WASHINGTON (MNI) - First quarter GDP growth was revised lower to a 
2.0% annual rate from the 2.2% pace in the second estimate, compared 
with expectations for no revision, data released Thursday by the Bureau 
of Economic Analysis showed. 
     Downward revisions to PCE and business inventories growth and a 
wider trade gap were the key factors, supplemented by an upward revision 
to the GDP price index. There was some offset by upward revisions to 
nonresidential fixed investment, residential fixed investment, and 
government spending. 
     While the headline number for GDP was revised down and the GDP 
price index was revised up, the market reaction should be muted by the 
fact that the core PCE price index was unrevised, that gross domestic 
income was revised up sharply, and that corporate profits growth is now 
positive, as well as analysts turning their attention to the second 
quarter. 
     Growth is expected to follow its usual seasonal pattern of 
rebounding from a softer first quarter pace when the advance second 
quarter data is released next month. Continued strong PCE growth is 
expected to be a key part of that rebound. 
--PICTURE REMAINS THE SAME 
     The third estimate of first quarter growth suggests little change 
in the overall growth picture, with the mix resulting in no adjustment 
to either current dollar GDP or real final sales of domestic product. 
There was only a modest upward adjustment to real final sales to 
domestic purchasers. Comprehensive benchmark revisions released with the 
advance second quarter next month may alter the historical growth 
pattern. 
     Gross domestic income, an alternative measure of growth, was 
revised up sharply to a 3.6% rate from the 2.8% pace reported in last 
month's report, keeping it well above the 1.0% rate in the fourth 
quarter. As a result, the GDI/GDP average was revised up to 2.8% from 
the 2.5% preliminary estimate. The average was 2.0% in the fourth 
quarter. 
     Inventory investment was revised down to a $13.9 gain for the 
quarter from the $20.2 billion gain in the second estimate. The net 
export gap now stands at $656.8 billion, wider than $650.9 billion gap 
in the second estimate. 
--LOWER PCE, INVENTORIES LEAD REVISION
     Within consumption, which was revised down to a 0.9% increase from 
1.0% in the second estimate, there was a downward revision to services 
spending that was partially offset by an upward adjustment to goods 
spending. Both durables and nondurables spending were revised up, though 
durable goods spending is still down from the first quarter. 
     The personal savings rate was revised up to 3.3% from 3.1% in the 
second estimate, remaining above the 2.7% rate in the first quarter. 
     Nonresidential fixed investment was revised higher to a 10.4% pace 
from the 9.2% gain in the second estimate, with an upward adjustment to 
structures, equipment, and intellectual property products. 
     Residential fixed investment was revised up to a 1.1% rate of 
decline from the 2.0% decline reported in the second estimate. 
     Government spending was revised up to a 1.3% gain, compared with a 
1.1% rise in the second estimate. 
     As a result of the mix of revisions, real final sales of domestic 
product was unrevised from the 2.0% increase in the second estimate. 
Real final sales to domestic purchasers was revised up modestly to a 
2.0% pace from 1.9% in the second estimate. 
     Corporate profits were revised up to a 1.8% rate of growth after 
originally being reported down 0.6% 
--CORE PCE PRICES UNREVISED
     The main GDP price index was revised up to a 2.2% pace from the 
1.9% rate previously reported but the remaining price measures were 
little altered. 
     The closely watched core PCE price index was unrevised from the 
2.3% gain in the second estimate, still above the 1.9% gain in the 
fourth quarter. The year/year rate for the measure remained at 1.6%, 
still slightly ahead of the 1.5% rise in the fourth quarter. 
--JOBLESS CLAIMS JUMP
     In other data released on Thursday, initial jobless claims rose by 
9,000 to 227,000 in the June 23 week, moving only slightly ahead of the 
tight range seen in recent weeks. The four-week average for initial 
claims rose by 1,000 to 222,000, and would be expected to rise further 
next week, all else being equal. Even so, claims remain well below their 
year ago levels by every measure. 
     Continuing claims, at 1.705 million in the June 16 employment 
survey week, were down 21,000 from the previous week and down 37,000 
from the level in the May 12 employment survey week, a positive for June 
payrolls. The four-week moving average for continuing claims fell by 
3,750 to 1.720m, again the lowest since the December 8, 1973 week. 
     ** MNI Washington Bureau: Tel. (202)371-2121 ** 
[TOPICS: MAUDS$,M$U$$$,MT$$$$,MAUDR$]

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