Friday, April 29, 2011

The Disappointing GDP Numbers

Disappointing news yesterday, as the first quarter GDP growth came in at just 1.8 percent, after we saw 3.1 percent growth in the fourth quarter of 2010. What happened? Consumer spending grew at about the same rate as the previous quarter, but no more than that, and net export growth was flat.

Is there a silver lining in any of this? Maybe, if you squint hard enough. One of the reasons for the slowing growth was government spending. Federal spending was flat from the previous quarter, and state and local spending was down. Overall, one estimate holds that diminished government expenditures knocked an entire point off the GDP figure.

That means the private sector is still holding its own. If you subtract out the public-sector numbers, the private sector GDP grew at about 2.8 percent, or right about where we had been. In fact, business spending was up at an annualized rate of $36 billion in the first quarter, after it had dropped in the fourth quarter of '10. That may not be the good news we were hoping to hear yesterday, but it's something.

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