1Q2011 Gross Domestic Product

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The Bureau of Economic Analysis (BEA) estimated 1Q2011 growth in real U.S. gross domestic product (GDP) at a 1.8 percent seasonally adjusted and annualized rate -- down noticeably from the previous quarter’s estimate of 3.1 percent. This revision leaves 4Q GDP growth higher than the 2.6 percent growth rate in 3Q. Personal consumption expenditures (PCE) and private domestic investment (PDI) contributed to growth while government consumption expenditures (GCE) subtracted from it. Net exports (NetX) were a “wash.”
 

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The Consumer Metrics Institute continues to question (legitimately, in our opinion) the reliability of the deflator used to arrive at the real GDP estimate: “Although the price indexes used for this quarter (representing an aggregate 1.9 percent annualized inflation rate) are higher than the credibility-stretching ones used for 4Q2010 (which representing an astonishingly low 0.4 percent annualized inflation rate), they are still significantly lower than the inflationary numbers published by the BEA's sister agencies. The Bureau of Labor Statistics (BLS) has most recently reported that the quarter ending year-over-year CPI-U rate for all items was 2.7 percent, even as the foreign trade price indexes showed year-over-year changes in excess of 9 percent. The importance of persistently low deflaters cannot be over emphasized: if the year-over-year CPI-U at the end of 1Q is used as an alternate deflater, real final sales actually contracted during the first quarter. Even more alarming: using the first quarter's average monthly CPI-U rates (a 5.75 percent annualized rate) would cause the entire GDP to be contracting at over a 2 percent rate.”