Gross Domestic Income drops, Investment higher, real final sales lower.
Superficially, the BEA reports GDP Declined 0.2 Percent in the first quarter of 2025. That is an upward revision of 0.1 percentage points (PP) that looks insignificant.
The actual details are more enlightening
Significant Changes
- Gross Domestic Income (GDI): -0.2 percent. GDI is not available in the advance report.
- Personal Consumption Expenditures (PCE): -0.41 PP
- Government Spending: +0.13 PP
- Gross Private Domestic Investment (GPDI): +0.38 PP
- Imports: -0.59 PP
- Change in Private Inventories (CIPI): +0.39 PP
- Real Final Sales: -0.40 PP
All of that adds up to a meaningless revision of +0.1 PP.
Change Synopsis
The upward revision in government spending accounts for all of the change. But that’s not significant.
The most significant change is to Real Final Sales, down 0.4 percentage points. RFS is the bottom line estimate for the economy. The rest is inventory adjustment (CIPI) that nets to zero over time.
From the fourth quarter of 2024, RFS was a whopping -2.9 percent. This will have a much bigger impact on the NBER’s recession determination than the top line report of -0.2 percent.
CIPI and RFS net to zero +- rounding errors.
The PCE revision (consumer spending) was -0.41 PP but Gross Private Domestic Investment rose 0.38 PP vs the previous report. This is a long-term excellent tradeoff, and the best part of the report.
GDPI contributed a whopping 3.98 percentage points to GDP in the first quarter.
However, most of that is an inventory adjustment. The fixed investment contribution (residential plus nonresidential) was a much lower 1.34 percentage points, up 0.20 percentage points from the previous report.
Real GDP, Real Final Sales, Real GDI 2025 Q1Second Estimate\
The upward revision from -0.3 percent to -0.2 percent is meaningless.
The huge revisions that fed that small change is important with short-term and long-term implications.
The Court Unanimously Strikes Down Trump’s Global Tariffs, Here’s Why
In case you missed it please see my post yesterday The Court Unanimously Strikes Down Trump’s Global Tariffs, Here’s Why
Reciprocal tariffs are dead. That does not mean all tariffs are dead. I will discuss Trump’s options for other tariffs later today.
Correction
The Real Final Sales number in the preceding chart (red bar) said “was -2.4”, corrected to “was -2.5”.
Q1 had 3 weeks of Biden and 2-3 weeks of Trump warming up. The economy is more than 2/3 the way through the 2nd quarter, which really started feeling the tariff crunch. I think GDP will be worse in Q2.
The money supply is currently increasing at a rate that would prevent any recession.
A quick check shows the silliness of that idea.
https://fred.stlouisfed.org/series/WM2NS
“Silliness” seems a bit of an overstatement. M2 is 4.3% higher than a year ago, growing faster than CPI. Shrinking real money supply is more typical as a precursor to recession, so Spencer isn’t being silly.
Tariffs are back on for now. Don’t be shocked if the Supreme Court rules in Trump’s favor.
Any person with any bit of common sense would be shocked if the SC ruled in favor of Trump on these emergency reciprocal tariffs.
Supreme court has been nakedly partisan recently. So I would not be shocked at all if they rule in favor of Trump.
Ridiculous
Trump is acting like a Constitutional idiot seeing what he can get away with.
I went over the details of the law.
Please tell me where the court went wrong and what the SC should do.
And by the way, did you want Biden to get away with Student Debt Cancellation?
If Rubio cuts a 100K/200K student visas he will blow a big hole in universities revenue. Since many universities are using David Swensen plans, they cannot pay the major banks. If their endowments are soaked with cash why did they borrow from the banks. One million foreign students are doing their doctorate and master degree. American students are denied bc of them. Some are national security risk.
Some ? It is very few.
If it’s 1% then with 1 million foreign students that means 10,000 are a security risk.
If it’s .1% then with 1 million foreign students that means 1000 are a security risk.
In the general population roughly 1% are violent criminals (rape, murder and the like). I’d imagine among foreign students it would be reasonably similar and even if it’s half the rate of normal population you are still talking about 5000 people.
That’s a load of statistical horses##t
Banks and nonbanks lent $1.3T to “quality borrowers” including university endowments like Harvard, MIT, Dirtmouth, Penn…About $600B from: JPM, WFC, BA and GS. Argentina is safer than Harvard.
I beg to differ. Harvard has a large surplus of money stored away from alumni’s donations, while Argentina has a long history of defaulting.
In addition, Harvard can appeal to its alumni base to donate extra cash in an emergency — Buenos Aires WISHES it had a base it could appeal to in the same manner.
And finally, Harvard can sell off some of its assets, including licensing its name and school crest to interested buyers, for things like clothes, coffee mugs, pens, and so on. It adds up — ask Star Wars toys buyers.
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Dark . Sport. Blog is my website — come visit me there!
Much of their money is in illiquid investments. If they sell they would have to take a big haircut. Their alumni is not exactly happy with Harvard now but the they could license the name to put on mugs, shirts, and the like.
Dr Alan Garber,Harvard graduation May 29, was a superstar. Trump administration will check all foreign students, prof, researchers and advisers visas: F1 for students and B1 and B2 visas for the rest. What happened to Harvard will happen to every university and colleges. Harvard $3B from the federal gov are gone.
In other news “EU Commission loses on all counts in Pfizergate legal case“. So at least lawyers and judges are doing well. And Rod Steward.
U guys can afford to bs Trump, but Harvard, MIT and John Hopkins can’t. TACO day for u.
Harvard will still be standing tall when Trump and all his idiot voters are feeding the worms. The maga movement is a fart in the wind.
A Bill for Trump’s Madness Will Come DueBy
Doug Henwood
Donald Trump once said that under him, we would “get tired of winning.” As the United States sees credit downgrades, deep budget cuts, and potential fiscal crises, the wins are pretty hard to find.
Harvard assets are based on David Swensen allocations. They are illiquid. 1.2 million International students enrolled in US colleges a new all time high. 75% of them are doing their doctorate degree. One million out of 1.2 millions: both Master and doctorate degrees. The rest are associates and undergraduate.
Source : US state dept and the institute of international edu.
Harvard got 3B grants and contract from the gov.
MIT gets 48% of their revenue from the gov.
John Hopkins gets 42% from the gov.
They cannot afford to bs Trump.
Chart #1: Change in private inventory is the highest. Chart #2: Real final sale plunged. Businesses speculated on higher prices, but they can’t sell their inventory.
Some of the inhabitants of formerly tariffed nations are already gloating.
http://www.x.com/acnewsitics/status/1927884550547378336
Doesn’t GDPI include inventory? If so I feel like that should be removed before evaluating if the number is “good”
my mistake this was addressed. duh
First quarter is presumably Jan-Mar time frame.
This is pre-tariffs and as Mish has mentioned people were trying to front run them and stock up anyway.
Yet real final sales are way down and tariffs can’t explain that. I wonder if the Feds QT draining trillions from the money supply over the past couple of years is finally making a real difference. In other words the free money that sloshed around for 3 years during Covid is finally almost dried up and now people are really broke.
“The judges gave the Trump administration 10 days to issue any administrative orders needed to effectuate their ruling”
So what if Trump ignores the courts and doesn’t issue “administrative orders”? Are the judges going to call the police? Are they going to slap Trump with a wet noodle? (I’d love to watch that, btw)
Laws depend on people following them. If people don’t follow them and there is no enforcement, then laws are meaningless. We already saw that with the illegal El Salvador deportations.
I remember when Trump CLAIMED to promote law and order, rather than nakedly working to flout it at every turn. And his voters VOTED for law and order. Now they are pretzel logicking their way to being right about this all along, too.
This attitude is pretty typical and people like this would be howling the second a democrat is in office and does the same thing. If we aren’t going to abide by court rulings we might as well just have the civil war now and get it over with.
It leads to a slippery slope where governors of blue states ignore laws, then sheriffs, then police then everybody. It’s called total anarchy. That may be what happens if Trump isn’t contained, enjoy your civil war.
Got exit strategy?
This is already done now in Blue / Red states and at Sheriff levels etc.
Enforcement is mostly at a local level. That’s the whole basis of States rights.
“Reciprocal tariffs are dead. That does not mean all tariffs are dead. I will discuss Trump’s options for other tariffs later today.”
And the Trump agenda is effectively dead at this point, lame quack and it’s only May.
Everyone who voted against him in November was, by Valentine’s Day, gratefully reminded just how incompetent Trump is as President.
The tariff part of the agenda might be dead. Not sure anyone is going to be overly sorry to see it go.
But closing the border, deporting illegals, killing DEI, stopping EV + Green energy mandates etc isn’t dead and have been quite successful so far.
The jury is still out on other things like re-shoring because that’s going to take years to figure out if that worked.
I don’t think the tariff is dead. It’s playing possum for the moment.
Maybe, I am interested in seeing Mishs post later today on Trumps options.
Personally I think there is another way he can sneakily achieve tariffs legally and I’ll post about that in Mishs upcoming post.
yep there are some positives that roll on. unfortunately the spend money on everybody so I can receive fawning praise as the debt ratchets up 2 trillion a year agenda is alive and picking up steam.
I was hoping the Big Beautiful Bill was on the ropes. No?
“But closing the border, deporting illegals, killing DEI, stopping EV + Green energy mandates etc isn’t dead and have been quite successful so far.”
If you haven’t figured out by now that ALL of that is just temporary then you’re really clueless Tim. The way things are going dems will have the full boat for 8 years starting at midterms but we’ll see.
They very well may have both houses at midterms.
But as far as I can tell, those policies I listed are extremely popular so they are unlikely to change any of them because they want to get / stay elected. Its the same reason there wasn’t a federal abortion law done when the Dems had control of both houses under Biden.
The more internal combustion engines are sold in the next few years, the longer the ICE infrastructure (gas stations, parts, repairmen) will exist.