One Bright Spot: Consumer Spending Rebounds
The economy contracted at a 6.1% annual rate in the first quarter, according to today's BEA report, which was worse than the 4.6% decrease in real GDP expected by economists. The one bright spot in today's report was the rebound in Personal Consumption Expenditures during the first quarter - consumer spending grew at 2.2% during the first quarter (see graph above) following two quarters of negative growth (-4.3% in 2008:Q4 and -3.9% in 2008:Q3), and was just slightly below the 2.27% average growth since 2001. REUTERS -- There were some bright spots in the report. Consumer spending, which accounts for over two-thirds of U.S. economic activity, rose 2.2%, after collapsing in the second half of last year. Consumer spending was boosted by a 9.4% jump in purchases of durable goods, the first advance after four quarters of decline.
WSJ -- GDP acts as a scoreboard for the economy by measuring all goods and services produced. Its biggest component is consumer spending, which accounts for about 70% of GDP. First-quarter spending increased 2.2%, after dropping 4.3% in the fourth quarter.
5 Comments:
So if 70% of GDP grew at 2.2%, but GDP declined by 6.1%, then the remaining 30% of GDP must have really tanked.
This might have something to do with tax returns. Just speculating. I know I spent $200 of my $400 tax return in durable goods.
Here are some data from the BEA's GROSS DOMESTIC PRODUCT: FIRST QUARTER 2009 (ADVANCE):
The real change in private inventories subtracted 2.79 percentage points from the first-quarter change in real GDP after subtracting 0.11 percentage point from the fourth-quarter change. Private businesses decreased inventories $103.7 billion in the first quarter, following decreases of $25.8 billion in the fourth quarter and $29.6 billion in the third.
Real final sales of domestic product -- GDP less change in private inventories -- decreased 3.4 percent in the first quarter, compared with a decrease of 6.2 percent in the fourth.
Real personal consumption expenditures increased 2.2 percent in the first quarter, in contrast to a decrease of 4.3 percent in the fourth.
Real nonresidential fixed investment decreased 37.9 percent in the first quarter, compared with a decrease of 21.7 percent in the fourth. Nonresidential structures decreased 44.2 percent, compared with a decrease of 9.4 percent. Equipment and software decreased 33.8 percent, compared with a decrease of 28.1 percent. Real residential fixed investment decreased 38.0 percent, compared with a decrease of 22.8 percent.
Real exports of goods and services decreased 30.0 percent in the first quarter, compared with a
decrease of 23.6 percent in the fourth. Real imports of goods and services decreased 34.1 percent,
compared with a decrease of 17.5 percent.
Real federal government consumption expenditures and gross investment decreased 4.0 percent in
the first quarter, in contrast to an increase of 7.0 percent in the fourth. National defense decreased 6.4 percent, in contrast to an increase of 3.4 percent. Nondefense increased 1.3 percent, compared with an increase of 15.3 percent. Real state and local government consumption expenditures and gross investment decreased 3.9 percent, compared with a decrease of 2.0 percent.
It's good to know that people haven't let a little thing like not having a job get in their way of buying a new plasma.
Yeah, I'm thinking the rise in consumer spending was due to tax returns as well.
I'm thinking consumer spending will crater yet again come this Summer when most tax returns have been spent.
Face it: we're in the beginning of our very own 'Lost Decade'.
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