1Q 2012 GDP

BEA’s advanced estimate on the 1st Quarter of 2012 is out and shows the economy grew by 2.2%. I should say “only” 2.2% since final number of 3% GDP growth in 4Q 2011. It is below the 2.6% economists had expected, according to the Wall Street Journal. However, as the New York Times notes, it is “maintaining what many economists have started to call a “sustainable” pace of recovery.” And the Washington Post concludes the data on increased consumer spending “suggests that the economy will continue to expand, slowly but steadily.”
Declines in federal, state and local government spending continue to be a drag on GDP growth. Another worrisome issues is the downward blip in nonresidential fixed investment (i.e. business spending). Investment in nonresidential structures dropped by 12.0%. Equipment and software increased by only 1.7% compared to an increase of 7.5% in the previous quarter. And, as I have noted before, the data has a basic problem in that it does not give us any guidance on investment in intangibles other than software. So we do not know whether companies have increased or decreased their investments in important areas such as human and organizational capital.
Note: these are advanced estimates subject to potentially large revisions. The next revision will be released on May 31.

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