WASHINGTON—The Commerce Department released its revised estimate for first quarter economic growth, revealing the U.S economy shrank 5% in the first quarter, a downward revision from the initial estimate.
NAFCU Chief Economist and VP of Research Curt Long said the fall in consumer spending "accounted for essentially all of the decline."
"More recent data indicates that household sentiment is holding up and consumers are beginning to open their wallets again, but the second-quarter decline will still be severe," said Long. "Business investment was already weak, but longer-term uncertainty will weigh heavily on risk appetite in the precarious environment this year, and even next."
Looking ahead, Long predicted "an even more severe contraction in Q2, followed by a tepid and uneven recovery into 2021."
Personal Consumption Down
According to the updated estimate, contributions to real GDP came from personal consumption (-4.7%), with the entirety of the drop from the services sector and investment (-1.8%). Net exports contributed 1.3% while government consumption contributed 0.2%.
PCE inflation, the Fed's preferred inflation metric, slowed somewhat, decreasing to 1.3%. Core PCE inflation (excluding food and energy) increased from 1.3% to 1.6%, Long said.
"As with all virus-related economic forecasts, there is much uncertainty and actual results will be determined by policymakers and the medical community," Long concluded.