Source: Economics Group of Wells Fargo Bank, N.A.
Summary
A 0.2% contraction compared to a first estimate of 0.3% may appear mild, but the underlying details are not encouraging. Corporate profits fell 3% and a key yardstick of underlying private demand slowed from 3.0% to 2.5%. We also unpack the overnight court ruling that puts tariffs on ice.Underlying Demand Slowed
Arguably the most consequential shift in the revisions is that with the softer growth in consumer spending and resulting boost to inventories, growth in real final sales to domestic private purchasers came down to just 2.5% from the prior estimate of 3.0%. Since this measure serves as a gauge of underlying demand (by excluding trade, inventories and government spending) it diminishes the argument that excluding trade, the economy is doing fine.