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Economy in Brief

U.S. GDP Growth Little-Revised And Weak
by Tom Moeller  June 24, 2011

In its "final" estimate of economic growth last quarter, the Commerce Department still didn't find much that was materially different from its "advance" reading. Real GDP grew 1.9% (SAAR), the weakest growth since Q2'10. The Q1 estimate fell short of Consensus expectations for 2.0% growth. Little economic momentum is expected in the near future. The National Association for Business Economics recently lowered its 2011 GDP growth estimate to 2.8% from 3.3% and also lowered next year's forecast to 3.2% from 3.4%.

The Q1 gain in corporate profits was strengthened slightly to 2.9% (10.2% y/y). Profits from abroad led the gain with a 14.6% increase (10.0% y/y). Nonfinancial sector earnings rose 6.9% (11.8% y/y) but earnings in the financial sector fell 15.5% (+6.7% y/y).

Weakness in last quarter's GDP components was widespread. The 2.2% (AR) gain in personal consumption of 2.2% was unrevised but the gain in business fixed investment of 2.0% was set back to the initial figure. The 1.9% decline in residential investment was roughly half initial figure. Finally, the decline in government spending was little-changed at 5.8%, still the most negative for any quarter since 1983. Lower defense purchases caused federal spending to fall at an 8.0% rate (+2.1% y/y) while budget shortfalls pulled state & local spending down at a 4.1% rate (-1.4% y/y), the most in a year.

Improvement in the foreign trade deficit added 0.1 percentage points to last quarter's GDP gain, though export growth of 7.7% (8.0% y/y) was revised down but it still exceeded the increased 5.1% rise (9.4% y/y) in imports. Quicker inventory accumulation added a little-revised 1.3 percentage points to GDP growth.

Price inflation as measured by the chained GDP price index quickened last quarter to a 2.0% rate, double last year's gain. The price index for domestic final demand jumped 3.9% (1.6% y/y) and the price index for final sales rose 2.0% (1.6% y/y). The GDP figures are available in Haver's USECON and USNA databases and the expectations number is in AS1REPNA.

Chained 2005 $, % AR Q1'11
Final		 Q1'11
Prelim.		 Q1'11
Adv.		 Q4'10 Q3'10 Q1'11
Y/Y		 2010 2009 2008
GDP 1.9 1.8 1.8 3.1 2.6 2.3 2.9 -2.6 -0.0
 Inventory Effect 1.3 1.2 0.9 -3.4 1.6 0.0 1.5 -0.5 -0.5
Final Sales 0.6 0.6 0.8 6.7 0.9 2.3 1.4 -2.1 0.5
Foreign Trade Effect 0.1 -0.1 -0.1 3.3 -1.7 -0.4 -0.5 1.0 -1.1
Domestic Final Demand 0.5 0.7 0.9 3.2 2.6 2.7 1.8 -3.1 -0.6
Demand Components
Personal Consumption 2.2 2.2 2.7 4.0 2.4 2.7 1.8 -1.2 -0.3
Business Fixed Investment 2.0 3.4 1.8 7.7 9.1 9.5 5.7 -17.1 0.3
Residential Investment -1.9 -3.3 -4.1 3.3 -27.3 -1.9 -3.0 -22.9 -24.0
Government Spending -5.8 -5.1 -5.2 -1.7 3.9 0.0 1.0 1.6 2.8
Prices
Chained GDP Price Index 2.0 1.9 1.9 0.4 2.1 1.6 1.0 0.9 2.2
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