GDP grew by 2.2 percent in Q1
In the first quarter of last year, GDP grew by 2.2 percent in annualised q-o-q terms, versus 3 percent in the fourth quarter. This was slightly weaker than expectations of 2.5 percent.
Private consumption expenditure increased by 2.9 percent, versus 2.1 percent in the fourth quarter. Public expenditure declined by 3 percent, versus a decline of 4.2 percent in the fourth quarter. Non-residential investment declined by 2.1 percent, versus an increase of 5.2 percent in the fourth quarter. Residential investment increased by 19.1 percent, versus 11.6 percent in the fourth quarter. Inventory investment added 0.6 percentage points to GDP growth, versus 1.8 percentage points in the fourth quarter. Net exports did not contribute to GDP growth at all, versus a negative contribution of 0.3 percentage points in the fourth quarter.
Growth at 2.5-3 percent for the next couple of years
Deeply-indebted American households that are worrying about unemployment and falling home prices have created a gap in demand. American businesses have to take advantage of rapidly increasing demand in emerging markets and a likely further depreciation of the trade-weighted USD. But that would require investment in capital and labour to develop new products and establishing logistics and marketing aimed at expanding exports. This transformation will take time. We expect low demand to be a restricting factor for the next five-to-ten years. Our forecast is that GDP growth will be erratic, averaging 2.5-3 percent during the next couple of years.