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Economy in Brief

U.S. GDP Growth Is Disappointing
by Tom Moeller  April 27, 2012

Economic growth slipped back onto the slow track last quarter with a disappointing 2.2% advance. The rise followed an unrevised 3.0% Q4 gain and was below Consensus estimates of a 2.5% rise. The highest expected gain was 3.0%. Despite the disappointment, during the last four quarters growth of 2.1% was the swiftest since Q1'11.

The shortfalls in last quarter's growth centered on declines in business fixed investment and government purchases. Capital spending declined at a 2.1% rate. It was the first decline since Q4'09 and down from last year's 8.8% advance. A 12.0% decline (+5.2% y/y) in structures investment accounted for much of the weakness. Investment in equipment, however, also grew a weakened 1.7% (7.8% y/y). Government purchases remained soft. Its 3.0% decline (-2.1% y/y) followed a 2.1% drop during all of last year. Declines ranged across sectors of government.

The rate of inventory building slowed and it added 0.6 percentage points to GDP's increase. Foreign trade contributed insignificantly as exports grew 5.4% (4.1% y/y) and imports rose 4.3% (2.6% y/y).

A pickup in consumer spending growth to 2.9% (1.9% y/y) was its highest rate since Q4'10. It reflected a 28.7% pop (7.8% y/y) in motor vehicles fueled by sales incentives. Spending in most other spending categories was firm as well including a 10.5% rise (7.1% y/y) in furnishings & durable household equipment and 6.7% growth (0.9% y/y) in clothing. Residential investment also benefitted from unseasonably warm temperatures and grew at a 19.0% (8.8% y/y) rate.

Price inflation as measured by the chain-weight price index picked up slightly to 1.5% versus its 0.9% Q4 advance. The gain was, however, below expectations for a 2.2% rise. The highest estimate was a 2.6% increase. Despite these moderate gains, prices rose a healthy 1.9% during the last four quarters fueled by higher gasoline prices.

The latest GDP figures can be found in Haver's USECON and USNA databases; USNA contains basically all of the Bureau of Economic Analysis' detail on the national accounts, including the new integrated economics accounts and the recently added GDP data for U.S. Territories. The Consensus estimates can be found in AS1REPNA.

Chained 2005 $,% AR Q1'12 Q4'11 Q3'11 Q1'12
Y/Y
2011 2010 2009
Gross Domestic Product 2.2 3.0 1.8 2.1 1.7 3.0 -3.5
 Inventory Effect 0.6 1.8 -1.4 0.2 -0.2 1.6 -0.9
Final Sales 1.6 1.1 3.2 1.9 1.9 1.4 -2.6
 Foreign Trade Effect -0.0 -0.3 0.4 0.2 0.1 -0.4 1.0
Domestic Final Sales 1.6 1.3 2.7 1.7 1.8 1.8 -3.6
Demand Components
Personal Consumption 2.9 2.1 1.7 1.9 2.2 2.0 -1.9
Business Fixed Investment -2.1 5.2 15.7 7.1 8.8 4.4 -17.9
Residential Investment 19.0 11.7 1.2 8.8 -1.3 -4.3 -22.2
Government Spending -3.0 -4.1 -0.1 -2.8 -2.1 0.7 1.7
Chain-Type Price Index
GDP 1.5 0.9 2.6 1.9 2.1 1.2 1.1
Final Sales of Domestic Product 1.5 0.9 2.6 1.9 2.1 1.2 1.0
Final Sales to Domestic Purchasers 2.4 1.1 2.0 2.2 2.5 1.5 -0.1
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