The first release of GDP data came out this morning with an advance estimate of 2.2 percent growth for quarter 1. Contributions of growth from the major components were:

Consumption Expenditures                       2.04
Investment Expenditures                           0.77
          Fixed Investment                             0.18
          Inventory                                          0.59
Government Expenditures                       -0.60
Net Exports                                              -0.01

First quarter growth was mostly growth in household consumption expenditures. The other components, as can be seen above, did not contribute very much. The investment expenditures contribution was mostly due to a positive inventory adjustment. Fixed investment expenditure growth, the expenditures that contribute to future productive capacity, was quite low in quarter 1 at 1.4 percent.

The composition of growth in fixed investment expenditure components was:

Fixed Investment Expenditures                 1.4
          Business Structures                      -12.0
          Equipment/Software                        1.7
          Residential Structures                   19.1

Fixed investment growth contained dramatically offsetting factors, with business structures contracting massively, residential structures expanding massively, and equipment/software growing slowly. While this national income and product account dataset is not available by state, it is close to guaranteed that the large expansion in residential structures is not on the coasts of the United States. It will be occurring in the middle of the country, from North Dakota down to Texas. The heterogeneity of growth across U.S. states has been a noticeable characteristic for a couple of years now, but that should be the topic of another blog.

The first quarter GDP result was broadly in-line with our forecast. Economic activity slowed down from 3 percent in 2011 quarter 4 to 2.2 percent in 2012 quarter 1. Our forecast called for more of a slowdown, to 1.5 percent. The largest reasons our forecast was slower than the actual were: consumption and inventory investment. Our forecast of 2.0 percent for consumption was only about 2/3rds of the actual value of 2.9 percent, and our forecast of about $40 billion dollars for inventory investment was $30 billion too low.

Again, I will use this blog-space to complain about the personal savings rate. It has been falling for six quarters in a row now, and this worries me. At 3.9 percent, it is at the lowest level since 2007 quarter 4. Given the still-too-high household debt levels in the United States, a rising savings rate would be more consistent with robust future economic growth.