The Economics Group of Wells Fargo Securities published the report linked below earlier this morning reviewing national gross domestic product (GDP) performance for the first quarter of 2010.
Media reports often focus on a singular statistic or metric of overall performance that the reporting agency will direct attention to within the first paragraph or two of an executive summary. Hence, the initial response from traditional outlets is that First Quarter GDP grew at 3.2%, signifying four consecutive quarters of growth (technically brining an end in the eyes of economists to our recent/current recession).
However, this 3.2% calculation of GDP growth is based on numerous factors that are not easily explained. The Wells Fargo report did identify some quarterly growth in a key area of interest to local governments, final sales (1.6% compared to last year). This should translate into higher sales tax revenues at the state or local level (with the exception of business lost to online sales or non-taxed markets).
Wells Fargo also examined the GDP Price Index, which indicates quarterly growth of less than 1%, indicating that inflation is relatively under control. However, aggregate measures of inflation are not universally applicable, especially at the consumer level when considering that individuals experience different needs with respect to fuel, energy, medical care and housing.
Based on the Chained Dollar Value of GDP (adjusted for inflation), here are some other observations:
- Quarterly GDP growth for the 1st Quarter, compared to the 4th Quarter of 2009, was less than 1%
- The total Chined value of GDP ($13.255 Trillion) is still less than this value at its height in the 2nd Quarter of 2008 ($13.415 Trillion)
- Growth in personal consumption is leaning more toward goods (durable and nondurable) and less toward services
- Private Domestic Investment grew 3.5% in the last quarter, and is up 7.7% compared to the 1st Quarter of 2009. However, due to the significance of the stock market and housing market collapses, this portion of GDP is still down 19.4% compared to pre-crash values in the 1st Quarter of 2008.
- Government expenditures (chained, adjusted for inflation) actually declined 0.5% compared to the last quarter. Federal spending continued to climb (+0.3%), while state and local spending declined for the third consecutive quarter (-1%)
- Overall personal consumer inflation for purposes of GDP over the past year (+2%) is slightly higher than inflation applicable to state and local government (+1.7%) – This is based on the price deflator measure promoted by Dr. David Ammons