A tepid quarter for GDP
The first quarter of the year saw disappointing growth in the US economy. Here are the factors that caused GDP to grow just 1.8 percent.
Thursday morning brought the first official look at GDP growth in the first quarter. Headline growth was a disappointing, if not surprising, 1.8%.Skip to next paragraph
Donald B. Marron is director of the Urban-Brookings Tax Policy Center. He previously served as a member of the President's Council of Economic Advisers and as acting director of the Congressional Budget Office.
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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.
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