Monday, May 3, 2010

GDP Data Show Continued Modest Growth

The advance GDP data for the first quarter of 2010 show continued moderate growth for the U.S. economy. The economy grew in the quarter at a 3.2 percent annual rate. Although slower than the 5.6 percent logged in Q4 2009, this was the third consecutive quarter of positive growth.

Consumer expenditure was the strongest driver of growth in the quarter. Private inventory accumulation, which turned positive for the first time since early 2008, also helped boost growth. Fixed investment was positive; a gain in its nonresidental component offset a slight fall in housing investment.

In the foreign sector, exports continued to grow, although less rapidly than in the previous quarter. Imports grew even more strongly, so net exports made a negative contribution to overall GDP growth. Government purchases grew slightly in absolute terms, but fell as a share of GDP, as stimulus spending winds down.

Overall, the report provides ground for cautious optimism. However, there are a few negative factors. One is the fact that consumer spending grew, in part, at the expense of saving, which fell to 3.0 percent of personal income. An increase in consumption at the expense of falling saving is not sustainable in the long run.

To download a free set of PowerPoint slides that presents the GDP data in a format you can use in your principles of economics course, follow this link. If you find the slides useful in your course, please post a comment!

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