The U.S. economy slowed somewhat in the first quarter of this year, growing at an annualized rate of 1.8 percent, according to advance estimates of real gross domestic product (GDP) released this morning. Real GDP grew 3.1 percent in the fourth quarter of 2010. One reason for slowed growth is higher energy costs, which have been a drag on the economy. With that said, this was the seventh consecutive quarter of positive growth in output, and the overall figure was in line with economists’ estimates.
For the manufacturing sector, the story continues to be the strong growth in durable goods, which were up 10.6 percent in the first quarter. Nondurables rose 2.1 percent, and services grew 1.7 percent. (See the accompanying figure.) While each of these numbers was below the faster growth rates experienced in the last quarter of 2010, they do reflect pent-up demand for products coming out of the recession domestically, with positive increases for each since late 2009 or early 2010. Durable goods alone, for instance, added 0.78 percentage points to real GDP in the first quarter of 2011.
Inventory growth was another strong contributor to growth, with nonfarm inventory accumulation adding 1 percentage point to real GDP. Inventories, which had fallen significantly in the fourth quarter, grew in the first quarter as firms rebuilt their stocks and overall demand strengthened.
Overall growth was led by healthy increases in consumer spending, nonresidential fixed investment in equipment and software, and exports. The rise in exports, though, was offset by strong growth in imports in the first quarter. Residential and nonresidential structure investment fell dramatically, and decreased government spending at the federal, state, and local levels remained a drag on economic output.
Chad Moutray is chief economist at the National Association of Manufacturers.
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