GDP Growth Falls in the First Quarter '11
The Bureau of Economic Analysis announced today that gross domestic product (GDP)– the output of goods and services produced by labor and property located in the United States — increased at a disappointing 1.8% in the first quarter of 2011 (from the fourth quarter to the first quarter). Remember that in the 4th quarter, real GDP increased 3.1 percent.
The Bureau emphasized their source data for this advance estimate may be subject to further revision by the source agency. The revised estimate for the first quarter, based on more complete data, will be released on May 26, 2011.
The Bureau stated:
The increase in real GDP in the first quarter primarily reflected positive contributions from personal consumption expenditures (PCE), private inventory investment, exports, and nonresidential fixed investment that were partly offset by negative contributions from federal government spending and state and local government spending. Imports, which are a subtraction in the calculation of GDP, increased.
The deceleration in real GDP in the first quarter primarily reflected a sharp upturn in imports, a deceleration in PCE, a larger decrease in federal government spending, and decelerations in nonresidential fixed investment and in exports that were partly offset by a sharp upturn in private inventory investment.
Despite the Fed’s optimistic pronouncements to the contrary, the Bureau noted that inflation seemed to be rearing its ugly head, reaching 3.8% in the first quarter. They continue:
The price index for gross domestic purchases, which measures prices paid by U.S. residents, increased 3.8 percent in the first quarter, compared with an increase of 2.1 percent in the fourth. Excluding food and energy prices, the price index for gross domestic purchases increased 2.2 percent in the first quarter, compared with an increase of 1.1 percent in the fourth.
Of course, we have never been a fan of stripping out energy and food prices. People have to eat and they have to travel. Yes, they are more volatile, but they also give a more accurate picture.
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