1Q 2012 GDP revised

The “second estimate” of the 1st quarter GDP is out, and as I noted in my earlier posting on the preliminary estimate, the number has significantly changed. According to the latest data, U.S. GDP grew at an annual rate of only 1.9%, compared with BEA’s advanced estimate of 2.2%. GDP growth in 4Q 2011 was 3%.
Part of the reason for the downward revision was larger estimate of the declines in federal, state and local government spending. Clearly government cuts in spending continue to be a drag on GDP growth.
The good news concerns spending on equipment and software. The preliminary estimate had it growing by only 1.7%; this advanced estimate has equipment and software spending growing by a more health 3.9%. That is still below the trend line for the last two years but much better than the huge declines in the early part of the Great Recession.
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 still estimates subject to potentially large revisions. The next revision will be released on June 28.

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