Advance Estimate of GDP for the First Quarter of 2012

Today’s advance estimate indicates that the economy posted its 11th straight quarter of positive growth, as real GDP (the total amount of goods and services produced in the country) grew at a 2.2 percent annual rate in the first quarter of this year (see first graph below). While the continued expansion of the economy is encouraging, additional growth is needed to replace the jobs lost in the deep recession that began at the end of 2007.

It is important to recognize that GDP is made up of various components. Several of the private sector components of GDP grew solidly in the first quarter. Personal consumption expenditures, for example, increased by 2.9 percent at an annual rate in 2012 Q1, as compared with 2.1 percent in the previous quarter. Auto production increased robustly, accounting for fully half of overall GDP growth in the first quarter. Residential construction increased by 19 percent, marking the first time since 2005 that residential construction has increased four quarters in a row. These are encouraging signs that the private sector is continuing to heal from the worst recession since the Great Depression.  

Overall GDP growth was weighed down by reduced spending in the government sector, however. According to the Bureau of Economic Analysis, national defense expenditures fell by 8.1 percent in the first quarter.  Government spending across all levels subtracted 0.6 percentage point from overall GDP growth.  The latest report continues a pattern of moderate growth in the private sector components of GDP and contraction of the government components of GDP.  The second graph below displays the four-quarter percent change in the private components of real GDP and of government spending.    

If only the private sector components of GDP are considered, GDP grew by 3.5 percent in 2012 Q1.