Looking for Growth
By Gus Krafve
May 10th, 2012
First
quarter GDP growth is in and it shows the US economy grew at 2.2%; below the
consensus estimate of 2.6%. The good
news is that the economy is growing. However, it remains concerning that economic growth is sluggish, coming
in below the historical trend of 3.3% growth for the past several
quarters. Drilling down into the
numbers, we see that the consumer is still spending for now despite rising gasoline
prices. Personal consumption was driven
by motor vehicle purchases which accounted for half of the growth in GDP. Conversely, government purchases fell at a
3.0% annual rate, led by a 5.6% drop in federal spending, mostly national
defense. State and local governments cut
spending at a 1.2% annual rate. This
sector has contracted in 14 of the past 17 quarters, as the deep recession and
slow recovery has led to decreased tax revenues and governmental belt
tightening.
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