The Bureau of Economic Analysis revised real GDP growth in the first quarter from 2.2 percent to 1.9 percent, as originally reported. The lower estimate resulted from slower inventory and nonresidential fixed investment, as well as faster import growth.
Consumers continue to be the main driver of economic growth. The consumption of goods, for instance, added 1.44 percentage points to the 1.9 percent of growth in real GDP. Of that number, durable goods added 1.05 percentage points, while nondurables contributed 0.38 percent. As such, manufacturing played a vital role in overall growth, especially in the motor vehicle sector.
Other areas of strength included fixed investment (both residential and nonresidential). Drags on the economy stem primarily from imports and government spending. On balance, international trade has a negative contribution, with import growth outpacing exports. Meanwhile, government reductions at both the federal as well as state and local levels reduced real GDP by 0.8 percentage points.
Overall, these numbers reflect slower growth in the first quarter than observed at the end of 2011, when real GDP increased by 3 percent in the fourth quarter. Much of the deceleration between the two quarters can be explained by larger-than-normal inventory accumulation in the fourth quarter. For 2012, I continue to forecast modest real GDP growth of 2.5 percent, with the current quarter up just over 2 percent.
Chad Moutray is chief economist, National Association of Manufacturers.