American 1st quarter gross domestic product is set to be cut again when the second and final revision is issued on June 25th, according to economists at JP Morgan Chase & Co in New York.
Economists at the largest U.S. bank are forecasting that annualized GDP for the first quarter will drop to -1.6% from the current reading of -1.0 percent. The initial release of this statistic on May 29th was 0.1 percent.
The culprit will be health care revenue which Morgan says fell 5.8 percent in the first quarter rather than the 9.7 percent increase included in the government’s prior GDP estimates. Revenues are based on the Quarterly Statistics Survey (QSS) released by the Census Bureau in Washington today.
The bank's estimate is preliminary because it is uncertain how much Bureau of Economic Analysis (BEA), which is responsible for GDP calculation, will reduce the official GDP numbers based on the new QSS information. It is possible for the downgrade to be considerably larger depending on how the BEA interprets the data.
Economists at Pierpont Securities LLC of Stamford Connecticut have an even lower -2.0 percent for Q1 GDP based on the same QSS numbers.
The 1.0 percent current GDP figure is the worst performance and the first negative quarter for the U.S. economy since -1.3 percent in the first three months of 2011. Any revision that brings annualized GDP below that -1.3 percent would hark back to the recession of 2008-2009 which ended in June 2009.
If the Morgan estimate of a 1.6 percent contraction in the first quarter is correct then the U.S. economy would have to grow at an average of 4.27 percent annually in the remainder of the year to reach the lower end of the Federal Reserve’s 2.8 percent - 3.0 percent GDP projection.
The American economy has not expanded at such a pace since the final six months of 2003 and the first three of 2004 when it averaged 4.63 percent.
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