April 28, 2011

1Q11 Advance Gross Domestic Product: An Annualized +1.8%

Filed under: Economy,Taxes & Government — Tom @ 8:21 am

As noted a few times in the past week, lots of folks have been scaling back their predictions of first-quarter growth to 1.5% or so.

For past recovery context, note that growth on Ronald Reagan’s watch during the seventh quarter after the 1980s recession ended was an annualized. 7.1%. We could sooooo use that right now. Oh well.

The latest:

  • At the Washington Examiner — “Federal Reserve Board Chairman Ben Bernanke, speaking at the board’s first ever news conference, said on Wednesday that the nation’s first quarter growth is expected to be “realitively weak” due to “transitory” reasons such as lower than expected military spending, weaker exports and bad weather.” Big Ben expects less than 2%.
  • At the Associated Press, Jeannine “Pollyanna” Aversa, who was at 2.2% two days ago, is now at 1.9%.
  • Reuters — “Economists in a Reuters survey forecast a 2.0 percent annualized pace of growth, compared with 3.1 percent in the fourth quarter, but rising commodity prices have left some worrying about a deeper slowdown.”

The report will be here at 8:30 a.m.

UPDATE: Here it is (full report here) —

Real gross domestic product — the output of goods and services produced by labor and property located in the United States — increased at an annual rate of 1.8 percent in the first quarter of 2011 (that is, from the fourth quarter to the first quarter) according to the “advance” estimate released by the Bureau of Economic Analysis. In the fourth quarter, real GDP increased 3.1 percent.

The Bureau emphasized that the first-quarter advance estimate released today is based on source data that are incomplete or subject to further revision by the source agency (see the box on page 3). The “second” estimate for the first quarter, based on more complete data, will be released on May 26, 2011.

The increase in real GDP in the first quarter primarily reflected positive contributions from personal consumption expenditures (PCE), private inventory investment, exports, and nonresidential fixed investment that were partly offset by negative contributions from federal government spending and state and local government spending. Imports, which are a subtraction in the calculation of GDP, increased.

Can’t wait to see the press reaction, which I would expect will be along the lines of “see, see, when we cut back on government spending, GDP suffers.” No, you ninnies, if you keep the private sector from doing its thing, you get mediocre results. Oh, and the reduction in government GDP-related related expenditures were primarily in national defense (down an annualized 11.7%).

UPDATE 2: Here’s Jeannine “Pollyanna” Aversa’s first pass as of 9:11 a.m., to be updated as the excuses get refined throughout the day —

Economy slowed by high gas prices, bad weather

The economy slowed sharply in the first three months of the year as high gas prices cut into consumer spending, bad weather delayed construction projects and the federal government slashed defense spending by the most in six years.

The Commerce Department said Thursday that the economy grew at a 1.8 percent annual rate in the January-March quarter. That was weaker than the 3.1 percent growth rate for the October-December quarter. And it was the worst showing since last spring when the European debt crisis slowed growth to a 1.7 percent pace.

Federal Reserve Chairman Ben Bernanke and other economists say the slowdown last quarter is a temporary setback. They generally agree that gas prices will stabilize and the economy will grow at a 3 percent pace in each of the next three quarters.

Sure babe, prosperity is just around the corner. Tell that to DOL, where the latest unemployment claims report came in with 429,000 seasonally adjusted initial claims, a huge jump from 404,000 the previous week when economists were expecting 395,000.

This “weather” excuse is also getting really annoying.

UPDATE 3: Zero Hedge

The bottom line: Q1 GDP ex-inventories came at 0.8%, the lowest since Q3 2009. The economy has hit stall speed, and absent another fiscal (nope) or monetary (QE3) stimulus, we will go negative in Q2, now that the full impact of the Japanese economic collapse has forced even the ostriches to pull their heads out of the sand.

I don’t know that we’ll go negative, but it’s hard to see how Sunshine Ben’s 3%-plus prediction for the next three quarters is going to come to pass.

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2 Comments

  1. Don’t forget the payroll tax break, which was theoretically supposed to generate the actual GDP growth noted. If this is true, there was zero sustainable first quarter GDP growth.

    Comment by Jim — April 28, 2011 @ 9:31 am

  2. [...] news (here, here, here) demonstrate that the economy is NOT on track, Wall Street is NOT reformed (maybe [...]

    Pingback by BizzyBlog — April 28, 2011 @ 7:09 pm

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