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Brent Meyer |

Economist

Brent Meyer

Brent Meyer is a former economist of the Federal Reserve Bank of Cleveland.

06.03.09

Economic Trends

Real GDP: First-Quarter 2009 Preliminary Estimate

Brent Meyer

First-quarter real GDP growth was revised up from an annualized percent change of −6.1 percent in the advance estimate to −5.7 percent, according to the preliminary estimate released by the Bureau of Economic Analysis (BEA). Most of the revisions to the components that comprise GDP were relatively minor.

Real GDP and Components, 2009:Q1 Preliminary Estimate

Quarterly change,
billions of 2000$
Annualized percent change, last:
Quarter
Four quarters
Real GDP
−168.4
−5.7
−2.5
Personal consumption
31.5
1.6
−1.4
  Durables
25.8
9.6
−8.3
  Nondurables
−3.4
−0.6
−3.4
Services
15.6
1.3
0.9
Business fixed investment
−146.0
−36.9
−16.0
  Equipment
−94.1
−33.5
−19.5
  Structures
−43.7
−42.3
−9.3
Residential investment
−38.2
−38.7
−23.4
Government spending
−18.4
−3.5
1.8
  National defense
−9.6
−6.7
5.1
Net exports
61.9
  Exports
−118.1
−28.7
−10.9
  Imports
−179.9
−34.1
−16.5
Private inventories
−91.4

Source: Bureau of Economic Analysis.

Personal consumption was revised down to an increase of 1.6 percent (from 2.2 percent), taking 0.4 percentage point (pp) away from real GDP growth. However, that is still well above its growth rate of −1.4 percent over the past four quarters. The downward revision to consumption was offset by a 0.5 percentage point upward revision to the change in private inventories. Though many analysts were previously encouraged by the steep sell-off in private inventories, the upward revision may dampen expectations for an impending accumulation.

Exports were revised up from −30.0 percent to −28.7 percent, though it remains the deepest quarterly decline since the fourth quarter of 1971. The upward revision to exports added 0.2 pp to output growth in the first quarter, and imports were virtually unrevised, boosting the contribution of net exports to GDP from 2.0 pp to 2.2 pp in the first quarter. Also, the estimate of first-quarter business fixed investment was revised up slightly, adding an additional 0.1 pp, though, at a quarterly growth rate of −36.9, it remains at a postwar-record low.

The panelists on the Blue Chip survey revised down their estimate of real GDP growth for 2009 from −2.6 percent to −2.8 percent, according to the May survey. However, that was an artifact of a downward surprise to their first-quarter growth estimate. Forecasts for the remaining quarters of 2009 were all revised up slightly. On the other hand, the consensus estimate for 2010 growth ticked down from 1.9 percent to 1.8 percent.

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According to the BEA’s report on personal income, the personal savings rate (as a percentage of disposable income) jumped up from 4.5 percent in March to 5.7 percent in April, its highest level since February 1995. The BEA did note that April’s estimates for disposable income (and the resulting savings rate) were bolstered by the reduction in personal taxes due to the American Recovery and Reinvestment Act of 2009 (ARRA). Nevertheless, over the past six months, the savings rate has averaged 4.3 percent, up dramatically from the six-month-average of 0.4 percent at the start of the recession. In the first quarter, consumption’s share of real GDP reached 72.2 percent (a postwar-record high).

As consumers continue to shift resources away from consumption and toward repairing their balance sheets (likely as a rational reaction to limited credit availability and decreased wealth), the question naturally arises: If consumption growth is likely to be dampened, what component will pick up the slack and how painful will that transition be?