by Steven Hansen and Doug Short The final revision to 1Q2011 GDP showed little change from the second estimate – except lower imports (less imports mean less subtraction from GDP) which was met almost equally by lower spending by local governments. Overall, this is a slight increase in GDP from 1.8% (advanced and second estimate) to …
The second 1Q2011 GDP estimate remained essentially unchanged, but the numbers reflected weaker consumer contributions and anemic “real final sales”. The biggest concern is the price deflater of 1.9%. If the total CPI rate of 3.2% were used real GDP growth would almost vanish (0.56%).
Pundits were looking for 1Q2011 GDP to rise over 2%. What happened is simply explained by the Bureau of Economic Analysis (BEA) as up things offset down things. The Q1 GDP second estimate of 1.8 was little more than half the long-term 3.3 GDP average, below the regression and spot on the 10-year moving average. The first quarter of 2011 doesn’t offer evidence of a strong recovery from the Financial Crisis and Great Recession.
If this 1Q2011 GDP growth of 1.8% is any indication, the headwinds on the economy due to government cutbacks has been underestimated. Consumer expenditures were the largest major component of growth and the decline in government contribution cancelled out more than half of the consumer spending gain.
It is generally known trade and private consumption and investment dominate GDP, but the wild swings through The Great Recession and the following recovery may not be recognized by some.