Keeping you up to date on the latest data releases.
Real GDP rose at an annualized rate of 1.8 percent in the first quarter (in line with expectations), compared to a 3.1 percent gain in the fourth quarter of 2010. The deceleration in output growth was primarily due to a sharp increase in imports (which enter in as a subtraction in GDP accounting), a slowdown in the growth rates of consumption, exports, and business fixed investment, and a larger decrease in government spending. These factors were partially offset by a jump in private inventories which added 0.9 percentage point to real GDP growth in the first quarter, after subtracting 3.4 percentage points in the fourth quarter. The year-over-year growth rate in real GDP edged down again, slipping from 2.8 percent in the fourth quarter to 2.3 percent in the first quarter, moving further away from its recent high of 3.2 percent in the third quarter. Real personal consumption rose 2.7 percent in the first quarter, compared to a 4.0 percent gain in the fourth quarter, largely as the growth in goods consumption slipped down from 9.3 percent to 4.7 percent.
Services consumption edged up from a 1.5 percent gain in the fourth quarter to 1.7 percent in the first quarter. Despite the first quarter hiccup, the 4-quarter growth rate in consumption stands at 2.8 percent, its highest level since the first quarter of 2007, and has now risen back to its 20-year average growth rate. Real business fixed investment rose just 1.8 percent in the first quarter, following a 7.7 percent increase in the fourth quarter. A sharp decrease in structures investment—down 22 percent in the first quarter—was to blame for the slowdown in BFI growth. Contrasting the decrease in structures, equipment and software investment rose 11.6 percent, accelerating from a 7.7 percent increase in the fourth quarter. Equipment and software investment has now posted double-digit gains in five of the last six quarters and is up 15 percent over the past year. On the other hand, residential investment slipped down 4.1 percent in the first quarter, and has fallen in 18 of the last 21 quarters. Real exports rose 5.0 percent in the first quarter—a slowdown from the growth rate over the last three quarters of 8.2 percent—contributing 0.6 percentage point to real GDP growth, compared to 1.1 percentage points in the fourth quarter. Real imports bounced back from a 12.6 percent decrease in the fourth quarter, rising 4.4 percent, though this is below its 4-quarter growth rate of 9.2 percent.
Total government consumption and investment fell 5.2 percent in the first quarter, following a 1.7 percent decrease in the fourth, pulling its 4-quarter growth rate down 0.2 percent. Federal consumption and investment plummeted 7.9 percent in the first quarter (its largest quarterly decline since the first quarter of 2000, largely on a 11.7 percent decline in defense spending. State and local government expenditures and investment fell 3.3 percent in the first quarter and is down 1.2 percent over the past year. An alternative snapshot of actual demand stemming from in the U.S.—final sales to domestic purchasers (which excludes inventories and net exports)—rose 2.4 percent in the first quarter, slowing from a 4.4 percent gain in the fourth quarter. The series is still up 3.4 percent over the past four quarters.