The private sector of the U.S. economy grew at a 2.8 percent annual rate in the first quarter of 2012, according to Friday's advance estimate from the Bureau of Economic Analysis. Overall growth of real GDP was 2.2 percent, pulled down by the continuing shrinkage of the government sector.
Consumption spending contributed 2.04 percentage points to real GDP growth, up from 1.47 points in Q4, 2011. Much of the slowdown in growth came from the investment component, which contributed only .18 percentage points to growth, down from .78 percent in Q4. The good news was that much less of the investment component took the form of inventory buildup. Inventory growth, which contributed 1.81 percentage points to the 3 percent Q4 growth, contributed just .59 percentage points in Q1. As a result, the growth rate of real final sales was actually half a percentage point faster in Q1 2012 than in Q4 2011.
Exports continued to be a bright spot in the GDP report, as they have been throughout the recovery. Exports contributed .73 percentage points to Q1 growth, up from .37 percentage points in Q4. Growth of imports almost exactly balanced exports, so net exports were essentially flat.
The steady shrinkage of the government sector continued for the sixth consecutive quarter. For the first time in a year, not a single component of government spending increased-federal, state or local; defense or nondefense. This update of a chart I first posted a couple of months ago tells the tale. Where is the "runaway growth of government" that the Tea Party keeps ranting about? Without the labels, one would think we were looking at the transition from Gordon Brown to David Cameron, not from Bush to Obama.
Of course, I should close with the ritual disclaimer: These are the "advance" estimates of GDP, based on a mix of real data from early in the quarter and extrapolations of past trends. They are often subject to substantial revision. Stay tuned for next month's installment of the "Perils of the Sputtering Recovery."
Follow this link to view or download the latest GDP details in convenient sideshow form.