In the first of a number of economic reports to be released today, the Bureau of Economic Analysis of the Commerce Department has announced that real GDP rose 3.2% in the first quarter of 2010:
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 3.2 percent in the first quarter of 2010, (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 5.6 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 27, 2010.
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 decreases in state and local government spending and in residential fixed investment. Imports, which are a subtraction in the calculation of GDP, increased.
The deceleration in real GDP in the first quarter primarily reflected decelerations in private inventory investment and in exports, a downturn in residential fixed investment, and a larger decrease in state and local government spending that were partly offset by an acceleration in PCE and a deceleration in imports.
Motor vehicle output added 0.52 percentage point to the first-quarter change in real GDP after adding 0.45 percentage point to the fourth-quarter change. Final sales of computers added 0.19 percentage point to the first-quarter change in real GDP after adding 0.01 percentage point to the fourth-quarter change.
Clearly, an increase in GDP is good news—better than flat or a decrease. I think we should be guarded in our reactions for a number of reasons. First, the 3.2% increase and a decline in growth form the fourth quarter of 2009 provides support for those who (like me) believe this is unlikely to be a sharp, V-shaped recovery. Second, a full half percentage point of the increase, nearly 20% of the total, comes in the form of an increase in automobile sales. That’s unlikely to be sustainable. Third, exports have declined and, if doubts about the strength of the Euro continue over the sovereign debt problems of Greece, Spain, and other Eurozone members, are likely to continue to do so as people seek shelter in dollars and the dollar strengthens against other currencies.
However, in more good news although inflation accelerated slightly it remains within manageable bounds. No fears of deflation and no fears of hyperinflation. Yet.
Bloomberg’s analysis is here. I’ll link to others as I come across them.
Update
Calculated Risk provides a little more analysis:
RI as a percent of GDP is at a new record low. And there is no reason to expect a sustained increase in RI until the excess housing inventory is absorbed.
Notice that RI usually recovers very quickly coming out of a recession. This time RI is moving sideways – not a good sign for a robust recovery in 2010.
This graph shows the real GDP declines from the prior peak for post WWII recessions.
The recent recession was the worst since WWII (the peak decline was 3.83% in Q2 2009).
Even after three quarters of growth, current GDP is still 1.2% below the prior peak in real terms. For a “V-shaped” recovery, GDP would already be close to previous highs – and GDP has performed better than most other indicators. The recovery has been modest-to-moderate so far, and if growth continues at this pace (I think it will slow), it will take a couple more quarters to return to the pre-recession peak in real GDP.
I agree. At least nationally it doesn’t look like a V-shaped recovery to me.
Economists had expected GDP of 3.3%, so the headline is a little lite, but it’s basically in line and will be subject to plenty of revisions.
Consumption grew 3.6%, so that’s good news.
But, this is well off the pace — totally as expected — from the 5.6% reading in Q4. That was helped by the inventory spending.
Quite a bit of the inventory spending was the automobile industry; the automobile industry was propped up by the “Cash for Clunkers” program; that’s not sustainable.
Obviously this has been the subject of spirited debate here, and elsewhere. Me? I’m with Dave, and his subsequent citations.
Cheerleaders will note the GDP numbers and cite it as proof of recovery, and of Obama’s stewardship. I know I’ll be accused of the opposite, but I think evidence and perspective are on my side. Growth is narrowly distributed in govt and healthcare, and some deferred purchase snapback. Looming policy related issues will act as a throttle to growth: increased employment costs, increased taxes and the inevitable increase in interest rates.
Certain un-named people (Michael Reynolds) are breaking out the champagne. I’m looking out 6-9-12 months and saying “no, we don’t have disaster, but we have slogging through peanut butter.”
One point is simply undeniable: housing wealth was decimated, and it fueled spending for 15 vears. The stock market still vexes me, but I’m not at all sure recovery of that wealth and its associated spending driver is sustainable. Onlt time will tell.
But did anyone see the latest tax proposal on dividends? Can you say suicidal policy?
Drew:
No Champagne, but I’ll take a slow U over a flatline or the off-the-cliff thing.
I think we have f–ked things up for a long, long time, and it will take us a long time to unf–k them.
We’d better all hope the Gen X-ers and Gen-whatevers don’t soon realize what a mess we Greatest Generationers and Boomers made of their futures. They’d hunt us down with baseball bats. And who could blame them?
Housing wealth was decimated and personal debt reached record (near record?) levels. I think that this will be a slow fragile recovery.
I think you are on the right track in noting that our economy is undergoing fundamental changes. Our economy has performed well with higher and lower taxes. The problem is more fundamental. I think that it probably has much to do with our lack of real innovation. We have also concentrated too much of our brainpower into the financial industry. We have placed our economy into the hands of too few people. We continue to head towards a two tier economy. Making government smaller, a worthy goal in many ways, will not change any of this.
Steve
Michael –
(and before I start, I hope the tour is going well, the engines didn’t clog with ash, and good Scotch is in your future.)
Now…….
“No Champagne, but I’ll take a slow U over a flatline or the off-the-cliff thing.”
Of course, but that’s not good enough for me. Look, you and I are labled “filthy rich.” Fine. But it was not always so. I started in the steel mills of northwestern Indiana. They aren’t filthy rich there. They need a generally vibrant economy. Cars and construction and appliances etc.
And I think this is the general problem. I care about these type of people. These are decent and good people. But they aren’t entrepreneurs or the brightest bulbs. They just want to put in a good weeks work at a reasonable wage, go to the pizza parlor on Friday, Little League, hope for a better future for their kids etc….. But they are reliant on general economic conditions. Not one in 500 can create anything. But some can…………we shouldn’t endorse policies that retard growth and thwart such people, in some misguided attempt to redistribute wealth. This will get me in trouble: But I’ve lived in the real world: alot of that policy will go to beer.
So why do we place (tax) penalties on those who pave the way?? It boggles my mind.
” I think we have f–ked things up for a long, long time, and it will take us a long time to unf–k them.”
Who “we” kemosabe? You are the champion of the profligate spending and taxing class. Not me.
“We’d better all hope the Gen X-ers and Gen-whatevers don’t soon realize what a mess we Greatest Generationers and Boomers made of their futures. They’d hunt us down with baseball bats. And who could blame them?”
Balls, again, Michael. I have saved money since my first paycheck at the “mill.” I’ve never lived an extravagant lifestyle. Never beyond my means. In fact, really well, well below my means. Parenting, I guess.
I understand your general point. But those of your philisophical pursuasion have really been seduced by the parasital class. Why?
Does it make you feel better about yourself to give away money? Guilt? Why? And why more?? And to what end?? I’ve paid millions in dollars in taxes, and I have to tell you, my worldview is that the recipients should be thankful. (They are not. They want more.) I don’t feel that in some tortured logic I haven’t paid my dues. That’s creepy.
But I have to ask: after decades of increasingly progressive taxation, increasing (% of GDP) government spending……..what do we have to show for it?? As a businessman: where is the return??
Just for the record Michael hasn’t always been well-to-do. He paid his dues waiting on tables and generally living by his wits before he sort of oopsed into what he’s doing now. I attribute it to the love of a good woman.
Indeed, Michael’s and my paths have been remarkably similar in some ways. I worked 30-40 hours a week at various part-time jobs all the way through college and grad school.
After grad school I worked as much as 80 hours a week for a decade or more. I’ve never been wealthy or wanted to be. I get by. By some people’s standards I guess we’re wealthy; by others we’re just barely scraping by.
Drew:
The we is the people of the US of A. That’s you, too. Unless you also intend to distance yourself from all those national achievements in which you had no direct part.
We are a country. We made mistakes. Even if you didn’t make them, and I didn’t make them. That’s the bitch of Democracy: we get a piece of the glory when we do right as a country, and we get a piece of the blame when we do wrong.
As as Dave points out (dude has a memory!) I came up the hard way. Army brat, high school drop-out, waiter, house painter, bowling alley pin jammer, stock clerk (as well as some slightly more exalted things.) When I met my wife 31 years ago I had just finally gotten an apartment in Austin after sleeping under a freeway overpass for weeks. I was working as a busboy. Ten years later when we sold our first book we were cleaning homes and offices on Cape Cod. This October will mark 40 years of full-time work, at least 15 years of that in no-status, blue collar jobs.
That experience left me understanding the difference between me and most of the people I worked with. I was in the sh-t jobs because of my own irresponsibility. Most of those people I worked with were never going to do any better, no matter how hard they worked. So will I take some of my money, and your money, and Fabulous Fab’s money and help out a working mother who needs to take her kid to a doctor? Yes.
For the record I’ve favored raising retirement ages, means-testing SS and Medicare, reforming welfare, and I’ve been for those things since I was about 16. So if you’re not to blame, then neither am I, because if I’d had my way we wouldn’t be robbing children to pay for our generation’s medical bills.
I’ve also supported paying for what we spend. Including wars and things Republicans like. I never heard a word from a Republican against going “Off budget” with a trillion dollar’s worth of wars.
But that f-ck up is on me, too, because George W. Bush was my president, the leader of my country, and whether my country is right or wrong, I own a piece of that.
Michael –
“The we is the people of the US of A. That’s you, too. Unless you also intend to distance yourself from all those national achievements in which you had no direct part.”
Nice try. In fact I do. I am but one voice, and one vote. And I disagree with so much of what has transpired.
“We are a country. We made mistakes. Even if you didn’t make them, and I didn’t make them. That’s the bitch of Democracy: we get a piece of the glory when we do right as a country, and we get a piece of the blame when we do wrong.”
Yes, we are a country. But I have no skin in the game of, say, slavery. Do you? If your great, great grand pappy was a slave owner, are you a pig? I don’t think so. And I don’t think you owe squat.
“As as Dave points out…………….that experience left me understanding the difference between me and most of the people I worked with. I was in the sh-t jobs because of my own irresponsibility.”
Yeah? And………do you have a point?
“Most of those people I worked with were never going to do any better, no matter how hard they worked. So will I take some of my money, and your money, and Fabulous Fab’s money and help out a working mother who needs to take her kid to a doctor? Yes.”
I understand. You have no care for property rights. You feel that your own personal moral values allow you to confiscate my property for your own ends. And so where does that end? Until you have all my money?
“For the record I’ve favored raising retirement ages, means-testing SS and Medicare, reforming welfare, and I’ve been for those things since I was about 16. So if you’re not to blame, then neither am I, because if I’d had my way we wouldn’t be robbing children to pay for our generation’s medical bills.”
Based on what you just said, above, that’s simply bogus. You just told me you have the moral right to confiscate my money. Then you want to follow on with exculpatory arguments about your own personal guidelines as to how to regulate or cap that. Well, what have we here?; Michael as King, as long as his exculpatory guidelines are OK with Michael. Crazy. That’s just mindless drivel, Michael.
“I’ve also supported paying for what we spend. Including wars and things Republicans like. I never heard a word from a Republican against going “Off budget†with a trillion dollar’s worth of wars.”
Just MR crap. Basically all you’ve said, Michael, is if you like it, its OK. If others don’t, fuck off.
Suppose I decide anyone named Michael Reynolds should die?
Drew:
You’re a smart guy but you have the philosophical depth and maturity of a toddler.
You aren’t able to muster actual arguments so you rant and call names. Which makes this discussion rather pointless. Bogus. . . drivel . . . crap. You’re interested in rage and resentment, and I’m just not. Life’s been good to me, I have more than I deserve, and I don’t feel the need to go around in a constant state of gritted teeth and barely-suppressed fury.
It’s just tiresome, dude. So no offense, but I don’t think there’s much profit in a dialog between us.