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Brent Meyer |


Brent Meyer

Brent Meyer is a former economist of the Federal Reserve Bank of Cleveland.


Economic Trends

Real GDP: First-Quarter 2009 Advance Estimate

Brent Meyer

Real GDP decreased at an annualized rate of 6.1 percent in the first quarter of 2009, slightly less negative than the fourth quarter’s −6.3 percent, but coming in worse than consensus expectations. The resulting four-quarter growth rate in real GDP fell to −2.6 percent, its lowest growth rate since the 1982 recession. The first-quarter decrease was driven by negative contributions from business fixed investment, exports, and private inventories, and it was partially offset by consumption gains and a decrease in imports (which adds to real GDP).

Real GDP and Components, 2009:Q1 Advance Estimate

Quarterly change,
billions of 2000$
Annualized percent change, last:
Four quarters
Real GDP
Personal consumption
Business fixed investment
Residential investment
Government spending
  National defense
Net exports
Private inventories

Source: Bureau of Economic Analysis.

Nonresidential fixed investment posted its sharpest postwar decrease, plummeting 37.9 percent in the first quarter and taking 4.7 percentage points away from real GDP growth. Real exports decreased 30.0 percent in the first quarter, subtracting 4.1 percentage points from growth and pushing the year-over-year growth rate down to −11.3 percent. However, imports fell even further, declining 34.1 percent during the quarter, which led to net exports actually adding 2.0 percentage points to real GDP growth.

Real personal consumption expenditures increased 2.2 percent (more than was expected), following two consecutive quarterly decreases. Spending on consumer durables jumped up 9.5 percent during the quarter, after four consecutive quarterly decreases. Embedded in the upside surprise in the quarterly consumption data were upward revisions to the monthly series. In fact, January’s estimate was revised up from an initial estimate of 4.6 percent to 10.8 percent. The sell-off in private inventories accelerated in the first quarter, subtracting 2.8 percentage points from growth, compared to a mere 0.1 percentage point in the fourth quarter.

Given the wild swings in the international trade data and private inventories, it might be useful to examine output changes that exclude those series. Real gross domestic purchases—which ignore net exports—fell 7.8 percent in the first quarter, following a 5.9 percent decrease last quarter. However, this series still includes the change in private inventories, which decreased dramatically in the first quarter. Final sales to domestic purchasers, a measure of domestic demand, excludes inventory changes in addition to subtracting net exports. Final sales decreased 5.1 percent in the first quarter, improving over the 5.8 percent falloff in the fourth quarter, and may offer some hope that demand is starting to return.

Panelists on the Blue Chip survey actually revised up their first-quarter growth estimate in the April survey (which takes place during the first week of April)—from −5.3 percent to −5.1 percent. Unfortunately, real GDP came in below expectations. That said, the consensus viewpoint is for the recession to end by midyear and to rebound toward trend growth by the fourth quarter of 2010.