Q1-2012 GDP Not Strong But No Recession Fears

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The Commerce Department has released its first quarter’s initial projection of Gross Domestic Product for the first quarter of 2012.  The results are weaker than expected but they will put the fears of any new recession to bed for at least a couple more quarters.  GDP for the first quarter was up by +2.2% against estimates of +2.6% from Dow Jones and +2.5% from Bloomberg.

If you use the PCE Price Index, the reading was +2.4%; and Bloomberg was projecting only +2.1%.

The report was held down by a deceleration in the private inventories and also by what was called a drop by about -2.1% in non-residential fixed investment like computers, structures, and heavy equipment.  The inventory issues is worth noting because an inventory build-up in the fourth quarter of 2011 was responsible for about half of the gains in Q4.

Austerity is alive, maybe.  Government spending was down by 3%, but that compares to -4.2% in the previous quarter.

It is the consumer that is saving GDP today because personal consumption was up by 2.9% and that was stronger than all of 2011.  The price index of personal consumption was up 2.4%.

Today’s data from the Commerce Department is the first look at Q1 GDP for 2012.  It will be revised twice over the next two months so it could be adjusted slightly higher or slightly lower as this is just the first reading.  It is obvious that growth is still under what the economy needs to truly be generating the adequate number of jobs and to be considered a healthy economy.  The other side of this coin is that those calling for another recession (it is too late for a double-dip recession to be possible now) will have to keep quiet for at least another quarter or two.