Keeping you up to date on the latest data releases.
Real GDP in the first quarter came in below consensus expectations, growing at an annual rate of 2.2 percent, a full 0.8 percentage point lower than the growth rate in the fourth quarter. Some strength could be seen in the real consumption numbers. Consumption grew 2.9 percent in the first quarter, accelerating from its 2.1 percent fourth-quarter growth rate. Goods consumption grew 6.2 percent after durables increased another 15.3 percent, and services rebounded from a 0.4 percent increase in the fourth quarter to a 1.2 percent increase in the first. In total, consumption accounted for 2.0 percentage points of real GDP growth in the first quarter. This was also an impressive report for residential investment, which grew 19.1 percent in the first quarter after increasing 11.6 percent in the fourth quarter of 2010. The contribution to overall growth from residential investment was 0.4 percentage points.
The weaker parts of the report centered on business fixed investment and government expenditures. Business investment fell 2.1 percent in the first quarter, breaking a string of eight consecutive quarterly increases. Both components of business investment were disappointing. Investment in business structures dropped 12.0 percent after a 0.9 percent fall in the fourth quarter, subtracting 0.4 percentage points from real GDP growth. Equipment and software decelerated dramatically, growing only 1.7 percent in the first quarter, its lowest reading in ten quarters. Business fixed investment reduced output growth by 0.2 percentage points in the first quarter. Government expenditures also weighed on output growth. Federal defense spending and investment continued the fourth quarter’s decline, dropping 8.1 percent, and nondefense spending and investment reversed course from its 4.5 percent fourth-quarter growth rate. Combined with state and local spending, government expenditures reduced real GDP by 0.6 percentage points.
Export growth accelerated in the first quarter, growing 5.4 percent thanks to a large increase in the growth of exported services. The same was true for imports, which grew 4.3 percent after imported services advanced 11.0 percent. The two series offset each other in terms of real GDP growth. After adjusting for the change in private inventories, real final sales of domestic product increased 1.6 percent in the first quarter, outpacing the 1.1 percent increase in the fourth quarter.