Real GDP rose in line with expectations

Real GDP rose by 3.2% in the first quarter, about in line with expectations. The increase in GDP was driven by solid consumer and business equipment spending along with inventory investment. Real GDP has risen by 2.5% over the last four quarters.

BOTTOM LINE: There were no major surprises in today’s GDP report. Stepping back, the good news is that the economy continues to recover as real GDP expanded for the third consecutive quarter and has grown at an average pace of 3.7% since the recession trough (by our estimates) in the second quarter of 2009. The bad news is that this pace of growth has not been sufficiently fast to make major inroads into unemployment (indeed the unemployment rate in March, at 9.7%, was 0.2% points higher than in June 2009). From a demand-side perspective, the problem is a slow recovery pace of final sales, which has averaged only 1.6% since the second quarter of last year (putting the average inventory contribution to growth at 2.0% points per quarter over this period). Final demand growth needs to pick up to sustain this growth pace through 2010 (which is our forecast) and there are encouraging signs in consumer spending and business equipment that this is occurring. However, with slow final demand growth, Bernanke & Co. will likely have no inclination to consider exit strategies from zero rates and a bloated balance sheet any time soon.

Source: RDQ


Popular posts from this blog

October retail sales come in strong, especially auto sales

Tea Party Buffalo Pictures

How to spot a fake Tea Partier