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By Len & Leslie Marma | Agent in Marshfield, MA

GDP Report Mixed for U.S. Households


GDP report mixed for U.S. households
By Jacob Gaffney
• April 27, 2012 •

Real gross domestic product increased at an annual rate of 2.2% in the first quarter of 2012, according to the Bureau of Economic Analysis.

In the fourth quarter of 2011, real GDP increased 3%. Despite the slowdown, economist are still positive that the current economic recovery, while slow, is on a sustainable path.

"Despite the weak start to the year, the economy appears solid," said Scott Hoyt, senior director of consumer economics, Moody’s Analytics. "Looking beyond temporary factors, GDP appears to be growing at an annual rate near 2.5%. While hardly a boom pace, this is strong enough to expand employment and reduce joblessness especially as some of the current drags wane in the second half of the year."

The increase in real GDP in the first quarter primarily reflected positive contributions from personal consumption expenditures, exports, private inventory investment, and residential fixed investment, the report said. These positives were partly offset by negative contributions from federal government spending, nonresidential fixed investment, and state and local government spending.

According to Capital Economics, the report is mixed for the nation's households. The economics firm found real personal disposable incomes rose only 0.4%.

"Households were only able to increase their spending at that pace by running down their saving rate to 3.9% in the first quarter from 4.5% in the quarter before," said senior economist Paul Ashworth in an emailed reaction to GDP. "The warm winter weather undoubtedly explains some of the massive 19.1% annualized jump in residential investment."

GDP is a meausre of the output of goods and services produced by labor and property located in the United States. Reports are compiled under the auspices of the Commerce Department. And despite being a national economic report, global events still weigh on its outcome.

"There are numerous threats to this relatively optimistic baseline outlook: a rise in oil and gasoline prices, a rekindled European debt crisis, a deeper housing crash, more federal fiscal drag than expected and a harder landing in China and other emerging-market economies," Hoyt added.

"But most of these possibilities feel less threatening than they did a few months ago," he said.


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