April 27, 2012

1Q12 Gross Domestic Product, First Pass: An Annualized 2.2%

Filed under: Economy,Taxes & Government — Tom @ 9:13 am

From Uncle Sam’s Bureau of Economic Analysis:

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 2.2 percent in the first quarter of 2012 (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 of 2011, real GDP increased 3.0 percent.

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

The deceleration in real GDP in the first quarter primarily reflected a deceleration in private inventory investment and a downturn in nonresidential fixed investment that were partly offset by accelerations in PCE and in exports.

I think this is a bust compared to recent expectations, which were for a reading of 2.5% to 3.0%.


  • Bloomberg — “Economy in U.S. Expands at 2.2% Annual Rate, Less Than Forecast”
  • Reuters (“Growth slows on inventories, weak business spending”) — “While that was below economists’ expectations for a 2.5 percent pace, a surge in consumer spending took some of the sting from the report. However, growth was still stronger than analysts’ predictions early in the quarter for an expansion below 1.5 percent.”
  • Associated Press, published before the release — “The consensus forecast is that gross domestic product – the output of all goods and services, from cars to electricity to manicures – grew at a 2.5 percent annual rate, according to a survey of economists by FactSet.” The headline: “Growth likely dipped in winter, but 2012 brightens.” On what planet, guys?
  • Business Insider’s email had a consensus expectation of 2.5%.

Zero Hedge reminds us that, if anything, the quarter should have been much more impressive because of the mild winter (paragraph breaks added by me):

Big GDP Miss: 2.2% Vs Expectations Of 2.5%, Composition Even Uglier

Instead of printing at the expected number of +2.5%, the first preliminary GDP data point (two more revisions pending) came out at 2.2%, a big disappointment for a quarter which had a substantial boost from the weather.

And while of the 2.2%, Personal Consumption came in strong – as expected, as it was precisely the factor most impacted by pulling in demand forward courtesy of “April in February”, 0.59% of the 2.2% was an increase in inventories, something which was not supposed to happen as it means that the quality of the economic growth in Q1 was far worse than expected.

Cementing the ugly composition of Q1 GDP was fixed investment which added just a paltry 0.18% – this is the number which is critical for ongoing cashflow generation and unfortunately, the very low print means that growth outlook for Q2 is now even worse than before and we expect economists will promptly trim their already bearish predictions for Q2 GDP.

Mediocre, non-job-generating growth (compared to what’s needed to make a significant dent), the hallmark of this, the worst recovery (and it’s barely that) since World War II, continues.



  1. Tom, you are always spot on, but I think you missed something if we read the same Reuters report on this. http://www.cnbc.com/id/47202822
    I didn’t realize that the recession ended in 2009? That is a howler of a statement that it was only a 2 year recession, and that leads to an assumption that the stimulus plan worked-unless the plan was to reward Obama donors (it did) and increase the deficit (debt on steriods). This is a disjointed, grasping at straws article that sounds like Carney-spin. Every negative, has a correlating positive to “take the sting out”. It’s pure Pravda start to finish IMO.

    Comment by Jeff — April 27, 2012 @ 10:21 am

  2. Thanks for the note, Jeff. It isn’t the identical Reuters item I saw, but I did just peruse it.

    Looking at it, it is OMG awful in excuse-making which I will try to get to posting about late tonight. Thx for that.

    As to the recession, it did officially end in June 2009 (end of second quarter) under both definitions:
    - resumption of economic growth (even though tepid)
    - the NBER’s arbitrary determination.

    Of course, it doesn’t feel like it because of the economy’s awful jobs performance, but it did end.

    The expression of the recession as “2007-2009″ is very deceptive. The NBER says the start point was Dec. 2007. The normal definition (two quarters of contraction) says it didn’t start until July 2008. So at worst (and I think NBER is objectively wrong) it was 19 months, and by the normal-person definition it was only 12.

    Comment by Tom — April 27, 2012 @ 10:31 am

  3. I expect that 2.2% increase in GDP to become 2.0% in upcoming weeks. With everything this administration reports, you can count on it being revised with the usual and predictable alibis.

    Comment by toledojim — April 27, 2012 @ 2:05 pm

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