US Q1 GDP grew at 1.8%, down from Q4 2010 pace of 3.1%

28 April 2011 14:11  [Source: ICIS news]

WASHINGTON (ICIS)--US gross domestic product (GDP) grew at an anaemic 1.8% in the first quarter this year, the Commerce Department said on Thursday, a sharp decline from the 3.1% annualised growth rate seen in the fourth quarter of 2010 and further evidence that the recovery has slowed.

In its first estimate of the economy's first quarter performance, the department said that the annualised 1.8% GDP growth rate was driven by business inventory build-ups, exports and commercial property investments.

Consumer spending also contributed to the modest first quarter expansion, but the department noted that what it calls personal consumption expenditures (PCE) grew at a pace that was much slower than in the fourth quarter of 2010.

In the first quarter this year, consumer spending grew at an annualised pace of 2.7%, but that is down from the PCE rate of 4% in the fourth quarter last year.

This is a concern to economists and policymakers who worry that consumers, with renewed concerns about the nation’s economy and their job security, may cut spending further.

Consumer spending is the principal driving force of the US economy, accounting for as much as 70% of all commercial activity.

First-quarter growth also was limited by a sharp upturn in imports, which counts as a negative to GDP, and decreased spending by the federal and state governments.

In normal economic times, the US economy would be expected to expand at an annual rate of 3% to 3.5%, known as trend growth.

The US economic recovery officially began in June 2009, and full-year 2010 GDP growth was 2.8%, just below trend.

But the first quarter 2011 GDP pace of 1.8% suggests that the US economy will have difficulty matching even the below-trend 2010 rate unless business activity and consumer spending accelerate significantly in the remaining three quarters of this year.

With GDP growth running at such a low rate, the economy is not expected to create enough new jobs to bring down the still-high unemployment rate, which now stands at 8.8%.

Paul Hodges studies key influencers shaping the chemical industry in Chemicals and the Economy

By: Joe Kamalick
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