Barclays: Q1 GDP Upward Revision Does Not Alter Soft Domestic Demand Slowdown
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Key Views
Consumer spending was revised down significantly to 0.5% q/q saar, as final services survey data proved weaker than initial assumptions. Residential investment also weakened, indicating core demand is still gradually decelerating. While AI-related capital expenditure continues to support nonresidential fixed investment—contributing prominently through software, data centers, and equipment—Barclays concludes this structural bright spot is insufficient to offset the broader domestic demand slowdown. The GDP revision largely reflects statistical noise and the normalization of government spending following a Q4 2025 federal shutdown, rather than genuine economic reacceleration.
Outlook
Barclays maintains its view of a gradual underlying slowdown. The FOMC is expected to prioritize core demand indicators like PDFP over headline GDP strength, continuing to balance inflation risks against cooling growth.
Recommended Securities
The report advises restraint regarding US reacceleration narratives and suggests caution for assets sensitive to broad consumer spending and services. It highlights structural focus on AI capital expenditure chains, including software, data centers, and related manufacturing.
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