Revised GDP Estimates for Q1 2014

Bottom line: The second estimate of GDP growth in the first quarter of 2014 was revised sharply upwards, to an annualized rate of 2.7%, from 2.1% initially.

Every component of GDP, except investments, was revised higher, most of them significantly. The conclusion arising from the first estimate, namely that the economy is undergoing a sharp slowdown, has been shown to have been premature.

• Overall GDP growth was revised higher not just for Q1 2014, as noted above, but also for the preceding two quarters: from 2.9% to 3.2% for Q4 2013, and from 1.9% to 2.0% for Q3. (All percentage changes are on an annual basis).
• The key area of weakness in the first estimate was private consumption. Here the decline has been reduced in the revised data, from 2.0% to 0.6% and the expansion in Q4 2013 has been revised up, from 1.1% to 1.6%.
• The revision upward of both export and import growth indicates that the external sector is also not suffering weakness — and this conclusion was confirmed by the data on the current account surplus for Q1, also published on June 16 and reviewed separately.
•  The Central Bureau of Statistics always warns on its quarterly data that these tend to be volatile and subject to significant revisions. The first quarter was an extreme example of this tendency — probably because of the impact of the Passover holiday falling in April this year (and thus in the second quarter) and in March last year. The seasonal adjustment process seems not to have fully corrected for this distortion.