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Friday, April 27, 2012

GDP Growth Slowed to 2.2% in Beginning of 2012

Growth in real GDP slowed more than expected in the first quarter of 2012, down to 2.2% annualized growth. This represents a slowdown from the 3.0% growth seen at the end of last year and falls short of the 2.5% – 2.8% growth expected.



The slowdown from fourth quarter growth was almost entirely due to decreased investment. Growth in fixed investment slowed substantially contributing only 0.18% to GDP growth, down from a contribution of 0.78% the previous period. Slowing inventory accumulation also contributed to the slowdown, contributing 0.59% to growth, down from 1.81%.



Despite the drag from investment, growth in consumer spending improved buoying GDP growth. Personal consumption contributed 2.04% to first quarter growth, up from 1.47% the previous quarter. Both goods and services spending contributed to the spending growth, adding 1.47% and 0.57 % respectively, up from 1.29% and 0.19% respectively.

Net exports were nearly neutral for first quarter growth, proving a 0.01% drag. This is an improvement from the 0.26% drag added in the fourth quarter. Exports contributed to growth in the second and third quarters of 2011.

The public sector continues to drag on growth, although by less than in previous quarters subtracting 0.6% from growth.

The PCE price indicator showed inflation at 2.4% in the first quarter, nearly double the rate at the end of last year. Although much of this was due to the rising cost of oil it contributed to weaker growth in real disposable income, which rose only 0.4%, down from 1.7%.

Read the report.

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