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: Calculated Risk

BEA: GDP Increases at 3.2% Annual Rate in Q1 2010

By Anonymous

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From the BEA:

Real gross domestic product -- the output of goods and services produced by labor and property located in the United States -- increased at an annual rate of 3.2 percent in the first quarter of 2010, (that is, from the fourth quarter to the first quarter), according to the "advance" estimate released by the Bureau of Economic Analysis.
...
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 decreases in state and local government spending and in residential fixed investment. Imports, which are a subtraction in the calculation of GDP, increased.
...
Real personal consumption expenditures increased 3.6 percent in the first quarter ... Real nonresidential fixed investment increased 4.1 percent ... Real residential fixed investment decreased 10.9 percent ...

The two leading sectors, residential investment (RI) and personal consumption expenditures (PCE), moved in different directions in Q1:

PCE increased at a 3.6% annualized growth rate compared to 1.6% in Q4. PCE was driven by a decline in the savings rate to 3.1% (from 3.9%) and transfer payments (I'll have more on this).

RI declined 10.9% in Q1, compared to an increase of 3.8% in Q4.

Click on graph for larger image in new window.

This graphs shows Residential investment (RI) as a percent of GDP since 1947.

RI as a percent of GDP is at a new record low. And there is no reason to expect a sustained increase in RI until the excess housing inventory is absorbed.

Notice that RI usually recovers very quickly coming out of a recession. This time RI is moving sideways - not a good sign for a robust recovery in 2010.

This graph shows the real GDP declines from the prior peak for post WWII recessions.

The recent recession was the worst since WWII (the peak decline was 3.83% in Q2 2009).

Even after three quarters of growth, current GDP is still 1.2% below the prior peak in real terms. For a "V-shaped" recovery, GDP would already be close to previous highs - and GDP has performed better than most other indicators. The recovery has been modest-to-moderate so far, and if growth continues at this pace (I think it will slow), it will take a couple more quarters to return to the pre-recession peak in real GDP.

I'll have some more on GDP and investment later ...

Full post as published by Calculated Risk on April 30, 2010 (boomark / email).