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First-Quarter GDP Growth Crawls at 1.9%

The US economy grew at an annual rate of 1.9 percent in the first quarter, the ""Bureau of Economic Analysis"":http://www.bea.gov/ reported Thursday in its third estimate of economic performance in the first quarter.

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The BEA report was consistent with market expectations but emphasized a moribund economy. The economy had expanded at a 3.0 percent pace in the fourth quarter of 2011.

In economic measurement terms, these data are ancient economic history since the second quarter ends Saturday. The advance first quarter GDP report will be released on July 27. The data released so far for April, May and early June suggest second quarter 2012 economic activity may have grown even less rapidly than in the disappointing first quarter which was down sharply from the fourth quarter of 2011.

First quarter growth estimates ├â┬ó├óÔÇÜ┬¼├óÔé¼┼ô as well as GDP changes dating back as far as 2009 ├â┬ó├óÔÇÜ┬¼├óÔé¼┼ô will be revised again when BEA issues its annual revisions when it releases its first report on second quarter GDP.

As in the earlier first quarter GDP estimates, government spending remained the drag on the economy and came from a reduction in government spending, which was down $25.2 billion from the fourth quarter, offsetting increases in consumption spending and investments. Government spending fell $26.4 billion in the fourth quarter and was down $54.1 billion for all of 2011.

Most of the quarter decline in government spending came at the federal level ├â┬ó├óÔÇÜ┬¼├óÔé¼┼ô down $15.7 billion while state and local government spending fell $9.9 billion (after rounding).

With the drop, government spending ├â┬ó├óÔÇÜ┬¼├óÔé¼┼ô at all levels ├â┬ó├óÔÇÜ┬¼├óÔé¼┼ô represented 18.2 percent of total GDP in the first quarter, down from 18.5 percent in the fourth quarter.

Total GDP grew $62.4 billion in the first quarter -- net of the drop in government spending ├â┬ó├óÔÇÜ┬¼├óÔé¼┼ô with consumer spending growing $58.0 billion. Consumer spending had been up $48.6 billion in the fourth quarter.

Overall, consumer spending represented 70.7 percent of total GDP in the first quarter, up slightly from 70.6 percent in the fourth quarter.

Residential fixed investment was up $15.6 billion in the first quarter compared with an increase of $9.1 billion in the fourth.

Residential fixed investment represented 2.6 percent of total GDP in the first quarter and 2.5 percent in the fourth quarter.

Domestic corporate profits, according to BEA and included in the GDP report, rose $41.7 billion in the first quarter, down from an increase of $58.3 billion in the fourth quarter.

Profits from domestic financial corporations improved $26.3 billion in the first quarter, according to BEA, down from growth of $29.9 billion in the fourth quarter. Non-financial corporate profits were up $15.4 billion in the first quarter, down from growth of $28.4 billion in the fourth quarter. The drop in profits at non-financial corporate profits means financial corporations accounted for 29.9 percent of all profits in the first quarter, up from 29.0 percent in the fourth quarter.

About Author: Mark Lieberman

Mark Lieberman is the former Senior Economist at Fox Business Network. He is now Managing Director and Senior Economist at Economics Analytics Research. He can be heard each Friday on The Morning Briefing on POTUS on Sirius-XM Radio 124.
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