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$]