GDP: These Awesome Charts Put the GDP Revision in Perspective

The advance estimate for Q1 GDP came in at 1.8 percent — a sharp decline from last quarter’s 3.1 percent but close to consensus of 1.7. The number was, however, well below the WSJ survey estimate average of 2.7. Here is an excerpt from the BEA announcement:

Real gross domestic product — the output of goods and services produced by labor and property located in the United States — increased at an annual rate of 1.8 percent in the first quarter of 2011 (that is, from the fourth quarter to the first quarter) according to the “advance” estimate released by the Bureau of Economic Analysis. In the fourth quarter, real GDP increased 3.1 percent.

The Bureau emphasized that the first-quarter advance estimate released today is based on source data that are incomplete or subject to further revision by the source agency (see the box on page 3). The “second” estimate for the first quarter, based on more complete data, will be released on May 26, 2011.

The increase in real GDP in the first quarter primarily reflected positive contributions from personal consumption expenditures (AMEX:PCE), private inventory investment, exports, and nonresidential fixed investment that were partly offset by negative contributions from federal government spending and state and local government spending. Imports, which are a subtraction in the calculation of GDP, increased.

The deceleration in real GDP in the first quarter primarily reflected a sharp upturn in imports, a deceleration in PCE, a larger decrease in federal government spending, and decelerations in nonresidential fixed investment and in exports that were partly offset by a sharp upturn in private inventory investment. More…

Here’s a look at GDP since Q2 1947 together with the real (inflation-adjusted) S&P Composite. The start date is when the BEA began reporting GDP on a quarterly basis. Prior to 1947, GDP was reported annually. To be more precise, what the lower half of the chart shows is the percent change from the preceding period in Real (inflation-adjusted) Gross Domestic Product. I’ve also included recessions, which are determined by the National Bureau of Economic Research (NBER).


Here a close-up of GDP alone with a line to illustrate the 3.3 average (arithmetic mean)for the quarterly series since the 1947. I’ve also plotted the 10-year moving average, which, at 1.8, is the same as today’s GDP number.


Here is the same chart with a linear regression that illustrates the gradual decline in GDP over this timeframe. The latest GDP number is about 0.4 below the approximate 2.2 of the regression at the same position on the horizontal axis.


In summary, the Advance Q1 2011 GDP of 1.8 was little more than half the long-term 3.3 GDP average. The first quarter of 2011 doesn’t offer evidence of a strong recovery from the Financial Crisis and Great Recession.

Doug Short Ph.d is the author of