core sector communique

U.S. Economy Grows: Private Spending Up, Government Spending Down

By MacKenzie C. Babb

Staff Writer

Washington - The U.S. economy posted its 11th straight quarter of positive growth with a 2.2 percent increase in gross domestic product (GDP) from January to March, according to the Commerce Department.

White House Council of Economic Advisers Chairman Alan Krueger said the April 27 report from the Commerce Department's Bureau of Economic Analysis shows "encouraging signs that the private sector is continuing to heal from the worst recession since the Great Depression."

He said the report "continues a pattern of moderate growth in the private-sector components of GDP and contraction of the government components of GDP."

The increase in real GDP, or the total output of goods and services produced in the United States, primarily reflected positive contributions from exports, private inventory investment and residential fixed investment. Adding significantly to the growth were personal consumption expenditures, which increased 2.9 percent, and residential construction, which grew 19 percent. Krueger said auto production also increased robustly, accounting for half of overall GDP growth during the period.

These gains were partly offset by negative contributions from federal government spending, nonresidential fixed investment and state and local government spending. Imports, which are a subtraction in the calculation of GDP, increased. Krueger said national defense expenditures fell by 8.1 percent in the first quarter, while government spending across all levels subtracted 0.6 percent from overall GDP growth.

Krueger said that while the "continued expansion of the economy is encouraging, additional growth is needed to replace the jobs lost in the deep recession that began at the end of 2007."

His remarks came a day after Federal Reserve Chairman Ben Bernanke said the United States' continued "moderate expansion" is providing critical support for ongoing improvements in the labor market.

Bernanke commended the drop of the unemployment rate by nearly a percentage point since August 2011, but said that at 8.2 percent, the jobless rate remains elevated. He said the Federal Reserve's policymaking arm, the Federal Open Market Committee, anticipates the unemployment rate will continue declining gradually to reflect the moderate pace of economic growth, dropping to between 7.8 percent and 8 percent by the end of 2012.

A revision of the GDP for January to March, based on new data collected over the next month, will be released May 31.

(This is a product of the Bureau of International Information Programs, U.S. Department of State.)