United States: Economy loses momentum in Q1
April 28, 2011
In the first quarter, GDP increased 1.8% over the previous quarter at a seasonally adjusted annualised rate, according to the advance estimate released by the Bureau of Economic Analysis (BEA) on 28 April. The figure represented a deceleration from the 3.1% expansion tallied in the final quarter of 2010, and came in below market expectations of a 2.0% expansion. On a year-on-year basis, GDP slowed from a 2.8% expansion in Q4 to a 2.3% increase in Q1. The deceleration during the first quarter reflected a strong rebound in imports and a deterioration in domestic demand. Growth in personal consumption expenditures slowed from 4.0% in Q4 to 2.7% in Q1, while government consumption dropped 5.2% over the previous quarter (Q4 2010: -1.7% qoq saar). Total fixed investment moderated markedly (Q4 2010: +6.8% qoq saar; Q1: +0.7% qoq saar) on the back of a sharp 4.1% decrease in the residential component (Q4 2010: +3.3% qoq saar). Non-residential investment also slowed at the outset of 2011, growing 0.7%, down from the 6.8% expansion in the final quarter of last year. Exports of goods and services expanded 4.9% (Q4 2010: +8.6% qoq saar) while imports rebounded strongly from a 12.6% drop in Q4 to a 4.4% rise in the first quarter. As a result, the net contribution from the external sector to overall growth swung from plus 3.27 percentage points in Q4 to minus 0.08 percentage points. The Federal Reserve revised its forecasts for economic activity and inflation at the 27 April meeting. The Fed sees GDP accelerating from growth of 2.9% in 2010 to a 3.1% to 3.3% range (previously expected: 3.4% ? 3.9%). In 2012, monetary authorities see the economy expanding between 3.5% and 4.2% (from a 3.5% ? 4.4% range).