The BEA revised GDP lower by 0.3 percentage points. The details are worse.
Evolution of 2025 First Quarter GDP
Today the BEA released the Third Estimate of First-Quarter GDP.
Changes in Contributions to GDP
- GDP down 0.2 from the first revision and down 0.3 from the second revison.
- Personal Consumption Expenditures (consumer spending) went on a nose dive from 1.21 percentage points to 0.8 percentage points to 0.31 percentage points.
- Domestic investment contributed an upwardly revised 3.90 percentage points. However, 2.59 percentage points was CIPI (Change in Private Inventories) front-loading inventories. Actual sales as noted by PCE plunged.
- Net exports were revised a bit higher from the initial -4.83 percent to a final -4.61 percent.
- Real Final Sales was down 0.4 percentage points from the first report and another 0.2 percentage points from the second to -3.10 percent.
Real Final Sales is the bottom line estimate of the economy. The rest is CIPI that nets to zero over time.
You can see this by subtracting CIPI from the top-line estimate now downgraded to -0.50 percent.
Economists Missed the Boat
The Bloomberg Econoday consensus was 0.2 percent unchanged from the second report.
Is the GDPNow Nowcast for the Second Quarter Overstated?
On June 25, 2025 I asked Is the GDPNow Nowcast for the Second Quarter Overstated?
Let’s check out some of my comments.
The Bloomberg Econoday Consensus trade estimate is $-90.7 Billion in a wide range of $-93.0 billion to $-70.0 billion.
What matters is what happens vs the model expects. I highly doubt the model expects a deficit of a mere $70.0 billion. Should that happen, I believe GDP estimates would soar.
In contrast, I suspect a deficit over $90.0 billion would likely to be negative to the model.
Key reports on the 26th plus Personal Income and Outlays on the 27th will heavily influence the forecasts. GDPNow on the 27th will reflect Personal Income and Outlays.
The Bloomberg Econoday range of Personal Consumption Expenditures is -0.2 % to 0.4 % with a consensus of 0.2 percent. That seems high given a dismal retail sales report for May.
However, it not the consensus estimates that matter. It what the model expects that matters.
Given poor retail sales, I thought PCE was high. And now we see huge revisions from the first contribution estimate of 1.21 down to 0.31 and that does not factor in May .
Today the Commerce Department reported International Trade was -96.6 billion bigger than the highest Bloomberg estimate. That means more inventory front-running.
Tomorrow the BEA reports personal consumption expenditures for May. The Consensus is +0.2 percentage points. I’ll take the under.
These changes are so wild that I do not know how the GDPNow model will react to them.
Related Posts
June 16, 2025: QCEW Report Shows Overstatement of Jobs by the BLS is Increasing
The discrepancy between QCEW and the BLS jobs report is rising.
June 17, 2025: Retail Sales Down Much More than Expected, Drop 0.9 Percent
Retail sales declined 0.9 percent led by autos down 3.5 percent.
June 23, 2025: Existing-Home Sales Rise 0.8 Percent in May, Inventory Soars
Existing home sales rose but flounder at low levels. Rising inventory will eventually impact prices.
Residential construction is dismal. And if you are honest you will admit the rise in nonresidential investment is due to Biden’s spending splurge than anything Trump did.
And the S & P 500 just set a new record today. Isn’t it reassuring that we can not trust ANY information from the folks we elected to serve US and those they appointed?
“Unexpected”?! Of course. Of course. It couldn’t be anything else! LOL
Yes, I was born at night, but it wasn’t last night!
Note: When the GDP goes down and/or the National Debt goes up, the ratio of Debt to GDP goes up. It is currently at 123%, and rising out of control.
Once apon a time Economists looked at this ratio and concluded that anything over 100% was unrecoverable. You can flee New York, but you can’t leave the USA.
I’ll be in my bunker, with a No Vacancy sign out front.
Oh God.
Mercy!
It’s very close to recession.
Ukraine and ME war save the day.
The economy has not been as good as we were told it was by the mainstream media during the 2024 election cycle. So chickens are coming home to roost now as far as GDP, etc.
Without budget deficit GDP will go straight to recession.
the answer is “gather the data you want” and “publicize the data you need”
#TrumpRecession
The Ayatollah : no ceasefire.
People get aggressive when you bomb ’em. Let Israel reap what it sowed.
Q1 2025: fake negative. Q2: fake positive. Q3 bearish. Q4: JP will do whatever he can to prevent recession in 2025 and in Q1/Q2 2026. JP will retire as best of the best, a genius.
It’s almost as if something catastrophically stupid happend in the past few weeks.
It’s almost as if Q1 ended 12 weeks ago and you’re being willfully irrelevant.
Joe and Janet F’d America – More Bad financial tidings on the way
Trump promised a golden age. Are you saying he hasn’t delivered?
Rather eat Trump TACO then Biden Harris shit burritos. No more open border and welfare state, and a much bigger f&ck you to those freeloaders who are bitching about repaying their student loans.
Well maybe you’re not part of the population that is finding out what FAFO means but your time is coming. Our only hope 86/47.
So… no, he hasn’t. Thank you for confirming.
Now, has he ended the war in Ukraine?
Right now, MSM is pushing happy stories to keep the charade going in the face of a poor economy.
Worst job market for college grads since 2012. You don’t hear the MSM talking much about that.
Lots of stuff has yet to show up in the economic readings: the immigration crackdown, record number of US citizens leaving the country for greener pastures, the effect of the tariffs (including the front-running of the tariffs) the deteriorating job market on top of federal job cuts, federal spending cuts, etc.
The good news? The stock market is setting records.
My daughter, who graduates college next May, just scored a co-op with a Fortune 500 company. She found out another co-op was staffed by a college graduate who had previously interned at Coca-Cola. It’s definitely a tougher job market for college graduates.
What I’m seeing:
1. Layoffs are exploding in the tech sector – some of it is AI the rest is business climate (tariff uncertainty).
2. Real estate is crashing. A dam break starts with a trickle then all at once. I still think it hits hard in 2026.
3. Debt is exploding – student loan garnishments, credit card debt, mortgage foreclosures increasing all happening at once.
4. Commercial real estate is imploding – kicking the debt default can will only last so long. There’s a trillion in debt that needs to be refinanced and at 5%+ it’s a loser proposition. This is why Trump wants rates down, the CRE crash right around the corner.
5. Whenever I go out, I see lots of FOR LEASE signs at strip malls, stand alone buildings, and abandoned old franchises (think Burger King, Pizza Hut store fronts).
6. A year ago every fast food place had “Now Hiring” signs everywhere, haven’t seen any lately on those windows or doors.
7. Big box stores have half the volume I’m used to seeing.
8. No Fed cuts keep rates relatively high.
I am going to buy more SPY Puts but further out in 2026 as a hedge and still holding October puts. I’m also collaring some stocks like NVDA since they’ve had a nice run from $105 to $155 today. I have also been loading up on municipal bonds that are paying 8 percent (TE yield) interest now.
The coming crash brought to you 100% by Trump & GOP clowns. 100%.
You can blame Trump for a lot of things but the CRE mess and Real Estate (homes) aren’t his doing as those have been a LONG time coming (since the crazy 2020 run up and in CRE case even earlier than that due to extend/pretend by banks).
As I mentioned a bit more than a month ago my company (oil&gas) continues to predict a big downturn in the 2nd half of the year and into 2026. So your S&P Puts hopefully will pay out but you might need them more towards December when everyone realizes Xmas isn’t coming this year.
Regarding point 8, I’ll start looking around here and see if it’s the same in Florida. This is a tourist/service economy so this will be ground zero for that kind of issue.
Regarding point 7, how many do you visit? I barely ever visit any besides Home Depot for things I need immediately. Almost everything else gets ordered online minus a trip to the big food wholesalers (CostCo/BJs/Sams). Big Box is all but dead thanks to online.
“ As I mentioned a bit more than a month ago my company (oil&gas) continues to predict a big downturn in the 2nd half of the year and into 2026.”
I’m curious. Downturn in what way? Demand? Price? Drilling? And what is “big”?
Did your company hedge some production at the recent temporary higher prices?
At $65 WTI I expect the number of drill rigs to keep dropping
US demand seems decent right now as we have seen two weeks of larger than expected inventory drawdowns.
We aren’t drillers. Our company is in oil field services (on and offshore). As in we sell consumable stuff to the drilling companies. What we’ve heard from our customers are that they are expecting to be ordering a lot less items from us in the 2nd half of the year and into 2026 (so we are ordering less to make sure we don’t get stuck with a lot of inventory). Presumably that means they expect to be doing a lot less drilling and I imagine that means they expect lower demand / lower oil prices since with Trump as President it wouldn’t be due to regulations.
While you are here, do you think the Shell/BP merger means anything?
I have been very busy lately. Not much time to check in here.
I am not expecting Shell to take over BP at this time. BP is thought of as an attractive acquisition by many. But no serious interest yet.
Perhaps something will happen in 2026.
If what you say is true about a slow down in oil & gas then Shell is better off waiting for the correction/down turn to buy BP. I assume BP’s valuation will drop if oil tanks.
Regarding point 7. My son is an independent contractor mapping big box stores using a specialized 360 degree camera inside and drones outside. He’s in Florida now and during a conservation yesterday he said “I think these stores are a money laundering operation, they have no customers” He is in these stores from opening till well past closing everyday.
Great comment until you hyped your Biden Harris imbeciles (with evidence) by trashing the Thump. I always felt sorry for Biden too, but not Harris. Whether you and Mish know it, we dodged a big missile so far.
Where did I mention Biden Harris in my comment? You are deranged if you read that somewhere in my comment.