GDP Rises at 3.2% Pace in First Quarter
WASHINGTON (
) -- A jump in personal spending helped the economy expand in the first quarter yet again, though the growth landed just a hair shy of expectations, the government said Friday.
According to the
Commerce Department's first estimate
on the nation's gross domestic product, the economy grew at a 3.2% annual pace, seasonally adjusted, to begin the year. Wall Street analysts had been forecasting a 3.4% rise, according to a consensus estimate provided by Reuters.
The rise falls short of economic growth statistics in the fourth quarter of 2009, when GDP rose at a 5.6% pace. Still, the first-quarter GDP showing picked up where 2009 left off, continuing a positive trend that now finds the economy reflecting expansion for three quarters in a row after contracting 2.4% for 2009.
A slowdown in slashing inventories -- considered a net positive in GDP parlance -- helped fuel the growth during the fourth quarter, making a pickup in first-quarter consumer spending the focus of economists' attention. As such, personal consumption expenditures rose at a 3.6% rate in the first quarter, which is the best spending mark since the first quarter of 2007. It increased 1.6% in the fourth quarter.
"This is a pretty decent number," said Craig Thomas, senior economist at PNC Financial, who had estimated a 3.4% rise in GDP. "There's definitely a nice jump in consumer expenditures. That's a big part of this recovery," later adding, "this is darn good growth, another bit of evidence that this recovery is for real."
Business spending on equipment and software also added to the expansion, increasing at a 13.4% rate.
But there were several items on the downside of the ledger. With many state budgets mired in fiscal quagmires, state and local government spending slowed in the first quarter, contracting at a 3.8% pace in the first quarter after dropping 2.2% in the fourth. Residential housing also slipped at a 10.9% yearly rate, while firm structure investment fell at a 14% pace.
Trading activity growth also slowed compared to fourth-quarter figures, as exports rose at a 5.8% clip in the first following a 22.8% climb. Imports, which are considered a net loss in GDP calculations, expanded at an 8.9% rate after a 15.8% jump in the fourth.
The government will release revisions to today's advance estimates on May 27.
-- Written by Sung Moss in New York