Services Data Suggest Upward Revision To First-Quarter GDP

The U.S. economy was probably not as weak in the first quarter as has been reported, with data on Wednesday showing stronger consumer spending and investment in intellectual products than previously estimated.

The Commerce Department’s quarterly services survey, or QSS, showing consumption, including healthcare spending, increased at a faster clip than the government had assumed in its second estimate of gross domestic product published last month.

According to JPMorgan, the QSS data suggested first-quarter consumer spending could be raised as much as two-tenths of a percentage point to a 2.1 percent annual rate when the government publishes its third GDP estimate on June 28.

JPMorgan also estimated that growth in spending on intellectual products, a wide variety of services ranging from entertainment to scientific research and development, could be revised up to a 1.5 percent rate from a pace of -0.1 percent.

That, together with data last week on international trade and construction spending, suggest first-quarter gross domestic product could be raised to as high as a 1.2 percent rate from the 0.8 percent pace the government reported last month.

“The upward revision to services consumption also has favorable forward-looking implications for second-quarter GDP growth,” said Daniel Silver, an economist at JPMorgan in New York.

The economy grew at a 1.4 percent rate in the fourth quarter.