Wednesday, June 26, 2013

First Quarter GDP Growth Revised Down to 1.8%

BEA’s final estimate of first quarter GDP revised growth down to 1.8% from its original estimate of 2.5% and second estimate of 2.4%. Despite the downward revision, GDP growth improved over fourth quarter growth in 2012, which increased 0.4%, but is well behind the 3.1% growth from the third quarter last year.

As previously noted following the BEA’s initial and second estimates, consumption drove first quarter GDP growth, rising 1.8%. Consumption was expected to decrease following the expiration of the payroll tax holiday, but the pace in the first quarter improved over the 1.3% gains in the fourth quarter. Inventories recovered slightly in the first quarter, but did not offset the decline in the previous quarter, likely due in part to Hurricane Sandy.

Fixed investment increased 0.4%, a slowing of 1.7% growth from the fourth quarter. Non-residential investment heavily contributed to the slowed growth.

Government spending continues to drag on the economy, as preparations for sequestration began. However the government drag, at 1.0%, was less than the fourth quarter drag. Net exports, after posting positive gains in the previous quarter, declined -0.1% in the first quarter.

Read the BEA release.

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