U.S. GDP Growth Revised Down to 2.7% for First Quarter The latest estimate for first-quarter U.S. gross domestic product growth was revised downward to a 2.7% annual rate from the previously estimated 3% rate, a decline that suggests that the initial stage of the economic expansion did not have as much steam as officials had hoped.

Economists surveyed by Bloomberg had expected first-quarter GDP to rise by 3%, following increases of 5.6% and 2.2% in the third and fourth quarters of 2009, respectively. The U.S government released revised GDP estimates several times as it receives information that was unavailable earlier.

The downward revision in first-quarter GDP growth primarily stemmed from a deceleration in consumer spending, and a larger U.S. trade deficit.

A detailed look at the revised numbers for the first quarter shows that consumer spending, which accounts for 65% to 70% of U.S. GDP, rose at a 3% annual rate, a reduction from the previously released 3.5% rate. Meanwhile, exports increased 11.3%, an improvement from the previously released 7.2% gain. However, imports rose more, increasing 14.8% compared to the earlier 10.4% estimated rise. Also, business investment increased 2.2%, down from the previously released 3.1% gain.

Bright Spots in the Numbers


One area that boosted first-quarter GDP was corporate profits, which increased by 8%, up from the previously released 5.5% gain.

During the past 12 months, U.S. GDP has risen 2.4%. In current dollar terms (not adjusted for inflation), U.S. GDP rose 3.9% in the first quarter or by $138.6 billion to an annual rate of $14.59 trillion. For all of 2009, GDP totaled $14.26 trillion, down 1.3% from 2008.

Another first-quarter bright spot: consumer prices, which rose at a 1.6% annual rate, with the core rate rising 0.7%. Each is within the U.S. Federal Reserve's comfort zone for inflation.

Economic Glass is Half Full (or Half Empty)


The revised first quarter 2.7% GDP growth statistic probably will not resolve the debate between economic bulls and bears regarding the recovery's status. Bulls will point to three straight quarters of growth as evidence that the worst commercial conditions since the Great Depression are behind the nation.

Conversely, bears will argue that even though economy clearly is recovering, the expansion's initial stage has not been as robust as the typical early-stage expansion, and that the downward revision for first quarter GDP hints that the recovery could be slowing.

One point the economic bulls and bears agree on: Sustained employment growth on the order of at least 150,000 to 200,000 jobs per month will be needed to jump-start the recovery into a self-sustaining expansion. Job gains below that level would make it virtually impossible for the U.S. economy to return to its output potential.

Increase your money and finance knowledge from home

Getting out of debt

Everyone hates debt. Get out of it.

View Course »

Managing your Portfolio

Keeping your portfolio and financial life fit!

View Course »

Add a Comment

*0 / 3000 Character Maximum