First-Quarter GDP Sputters - May 31, 2012
Earlier this morning, the U.S. Commerce Department reported that the nation's gross domestic product had increased by a tepid 1.9% during the first three months of this year. That rise represented a downward revision from the initially reported estimate of a 2.2% growth rate. Expectations had been that GDP would have gained 1.9% in the period. So, there was no surprise there.
Real gross domestic product--the output of goods and services produced by labor and property located in the United States--rose by the aforementioned 1.9% in the period, primarily reflecting positive contributions from personal consumption expenditures, exports, residential fixed investment, private inventory investment, and nonresidential fixed investment.
Such strength was countered by negative contributions from federal government spending, state and local government spending, and imports. Imports, which detract from GDP, just as exports increase GDP, rose in the first quarter, thereby pressuring aggregate growth in this country.
The deceleration in GDP from the fourth quarter of last year to the opening period of 2012 primarily reflected a lessening in inventory accumulation in the latest three months, an acceleration in imports, and a pullback nonresidential fixed investment.
Notwithstanding the reduction in the first-quarter GDP estimate from 2.2% to 1.9% and also the reduction for the fourth-quarter rise of 3.0%, the latest 1.9% GDP result represented a gain over each of the first three quarters of 2011, suggesting that the nation's forward march continues, albeit at a somewhat disheartening pace. Our sense, moreover, is that the current range of improvement will be the rule for 2012, when we would expect growth to just narrowly exceed 2% for the 12 months.
Issued along with this latest report was another increase--this time of 10,000--in weekly jobless claims. That result does not augur well for tomorrow's key data on non-farm payrolls, where an increase of 150,000 is the consensus forecast.
At the time of this article's writing, the author did not have positions in any of the companies mentioned.