First-Quarter GDP Growth Is Unrevised - June 28, 2012
The U.S. economy continues to march in place, and the latest evidence of this middling pattern is the fact that the third, and final, look at nation's opening-quarter rate of gross domestic product growth showed that the earlier estimated gain of 1.9% has held. This unprepossessing performance, moreover, now looks as though it will be the model for the year, rather than the sluggish starting point in a sequentially better showing over the balance of the year. Estimates had been that GDP growth would have remained at 1.9% for the recent period. By comparison, GDP had increased by 3.0% in the fourth quarter of last year. However, a big chunk of that earlier gain had been accounted for by surging inventories, which add to a quarter's growth, but will often take a toll in future periods, as those enlarged stocks must normally be worked down before gains in future output are seen.
Real gross domestic product, or GDP, is the total output of goods and services produced by labor and property located in the United States. The latest estimate is based on more complete source data than were the two prior estimates for the period. Late next month, we will get the first, or flash, estimate of second-quarter GDP. Our sense, at this time, is that this metric will not vary much at all from the aforementioned first-quarter pace.
Meanwhile, the increase in GDP seen in the initial period reflected positive contributions from personal consumption expenditures, exports, residential fixed investment, nonresdidential fixed investment, and inventory accumulation. Working against GDP in the opening stanza were declines in federal, state, and local government spending and gains in imports. The latter detracts from GDP growth. It should be noted that GDP is not only composed of activity in this country, but also reflects the accumulated total of exports less imports.
Looking at the various components of the latest GDP report, we find that while the aggregate growth rate did not change from the prior revision in late May, some individual components did change. For example, exports grew by 4.2% in this report, which was down notably from the earlier estimated first-quarter gain of 7.2%. And consumer spending ticked up by 2.5%, instead of the earlier forecast increase of 2.7%. Finally, the latest report showed a bigger rise in business fixed investment than was earlier estimated. All in all, the report was not a surprise nor was it an economic game changer.
At the time of this report's writing, the author did not have positions in any of the companies mentioned.