Thursday morning brought the first official look at GDP growth in the first quarter. Headline growth was a disappointing, if not surprising, 1.8%.
Here’s my usual graph of how various components of the economy contributed to overall growth:
Consumers continued to spend at a moderate pace; their spending grew at a 2.7% rate, thus adding 1.9 percentage points to overall growth. Equipment and software investment (up at a 12.6% rate), inventories, and exports also contributed to growth.
Residential investment fell back into negative territory, reflecting the latest down leg in the housing market. But the real negatives were structures (down at a 21.7% rate, thus cutting 0.6 percentage points from growth) and government (down at a 5.2% rate). Defense spending fell sharply (11.7% rate), and state and local continued its decline (down at a 3.3% rate).
Note: As usual, imports subtracted from growth as conventionally measured. As discussed in this post and this post, I’d like to see GDP contributions data that allocate imports across the other sectors. Such data would reveal, for example, how much consumer spending contributed to growth in the U.S. economy itself. Presumably it’s less than the 1.9 percentage points shown in the chart, which reflects consumer spending that was satisfied by both domestic and international production, but we don’t know by how much.
Dr. Marron: There is an input/output procedure that allocates imports by industry to each final demand component and to intermediate demand. Using it permits one to estimate the value of imports sold either directly to each final demand component or that are used as inputs into the goods that each demand component purchases. Granted this procedure is an approximation but short of tracking each dollar of imports to its actual purchaser it is timely and inexpensive. Studies that try to estimate the employment impact of various demand changes use it to remove the leakage due to imports. If you would like an exposition of this procedure I would be happy to provide it.
Donald,
I think it would be helpful if you could shed some light on what you think the recent numbers mean, looking forward, and perhaps looking back, 4-6 years.
You have an incredible insight, base knowledge and working experience of which way this data points.
Though people love data (and probably your blog, at least I do as do my colleagues I’ve recommended it to), you have a keen awareness of what this data means in the near future, a great concern for all, it’s a brilliant, yet practical, grounded view and perspective, actually.
I realize it may not be politically savvy to state your thoughts (from both conservative and liberal points of views)…but for those of us who look at the world, with practical concerns, your insights would be most welcome and perhaps, revealing…. a blessing and breath of fresh air, actually.
It’s understood that put these things out there for people to be helpful for people to ascertain their own opinions, but your insights are keen and cut through the economic fog, which is always spun politically, rather than quantitatively.
There should be “a Rap” for that…
Cheers and my best,
Jonathan