logo
  Join        Login             Stock Quote

Is Q2 GDP To See A Slower Growth Rate?

 April 30, 2012 09:51 AM


(By R. Chandrasekaran) The real gross domestic product (GDP) for the first quarter advanced 2.2 percent at an annualized rate. This is the eleventh straight quarter of GDP expansion and comes on top of 3.0 percent upside witnessed in the fourth quarter. Significantly, the first quarter GDP growth pace came below economists' predictions of 2.5 percent growth.

With disappointing fixed investment spending, the next question is whether the second quarter GDP will be slower than the first quarter.

Real personal consumption expenditures recorded a 2.9 percent increase, the biggest growth pace in five quarters. This was fueled by 15.3 percent increase towards durable goods spending, which witnessed the second straight quarter of double-digit upside.

[Related -Initial Jobless Claims Rose Unexpectedly]

Auto sales looked positive after a few years of weak sales. However, spending towards services continued to be slower than in Q4, rising only 1.2 percent. This is only half the rate that averaged between the 2003 and 2007 expansion.

While consumer spending was strong, fixed investment spending was a big disappointment rising at just 1.4 percent rate in the first quarter. Significant growth of 19.1 percent in residential investment was mostly offset by the 12.0 percent drop in nonresidential construction.

Business spending towards equipment and software grew only 1.7 percent, the weakest growth rate after the 2009 second quarter. Government spending continued to exert headwinds on the economy dragging at a 3.0 percent pace. For the six straight quarters, government spending has contracted on cutbacks at the state as well as local levels.

[Related -All Quiet on the Record High Front]

The possible biggest concern seems to be higher inventories that had boosted headline growth pace by 60 basis points. Business might witness slower paces of production if the buildups were unintended. Also, recent events indicate that industrial production growth rate has slowed down.

In a research note to clients, Wells Fargo estimates second quarter GDP to be sub-2 percent growth pace. In 2011, first quarter GDP rose a modest 0.4 percent, whereas second quarter witnessed 1.3 percent upside. Unlike last year, the economy is not stalling. Yet, economists would not term the 2.2 percent growth as strong.

The situation in the rest of the world is not good enough for the largest economy of the world to look for solid exports in the second quarter. Obviously some fiscal tightening in the rest of the world could impact the U.S. GDP.

iOnTheMarket Premium
Advertisement

Advertisement


Post Comment -- Login is required to post message
Name:  
Alert for new comments:
Your email:
Your Website:
Title:
Comments:
 

rss feed

Latest Stories

article imageInitial Jobless Claims Rose Unexpectedly

Claims unexpectedly rose in the latest report through last weekend to breach 300,000 for the first time read on...

article imageAll Quiet on the Record High Front

What can we glean from the media’s lack of attention to the market’s recent record read on...

article imageThe Chip Maker Short Sellers Should Be Watching

Investing in semiconductor stocks is always tricky. Industry cycles can lead to bumps in the road for the read on...

article imageChicago Fed: US Economic Growth Slowed In October

The pace of US growth slowed more than expected in October, according to this morning’s update of the read on...

Advertisement
Popular Articles

Advertisement
Daily Sector Scan
Partner Center



Fundamental data is provided by Zacks Investment Research, and Commentary, news and Press Releases provided by YellowBrix and Quotemedia.
All information provided "as is" for informational purposes only, not intended for trading purposes or advice. iStockAnalyst.com is not an investment adviser and does not provide, endorse or review any information or data contained herein.
The blog articles are opinions by respective blogger. By using this site you are agreeing to terms and conditions posted on respective bloggers' website.
The postings/comments on the site may or may not be from reliable sources. Neither iStockAnalyst nor any of its independent providers is liable for any informational errors, incompleteness, or delays, or for any actions taken in reliance on information contained herein. You are solely responsible for the investment decisions made by you and the consequences resulting therefrom. By accessing the iStockAnalyst.com site, you agree not to redistribute the information found therein.
The sector scan is based on 15-30 minutes delayed data. The Pattern scan is based on EOD data.