First-Quarter GDP Growth Slows to 2.2%, Drop in Government Spending

The U.S. economy grew at a disappointing 2.2 percent rate in the first quarter, the ""Bureau of Economic Analysis"":http://www.bea.gov/ reported Friday, down from the 3.0 percent growth rate in the fourth quarter and below expectations. Economists had expected GDP to grow at 2.5 percent in the first quarter. A drop in government spending was the biggest factor in the slowdown in growth.

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Friday's BEA report was an ""advance estimate"" based on incomplete data subject to revision or in some cases, data that has not yet been reported.

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In dollar terms, GDP increased $73.4 billion, most of which was an increase in personal consumption - $68.1 billion. A slowdown in government spending subtracted $19.0 billion, most of which was a $15.0 billion drop in federal spending in the first quarter from the fourth.

Government purchases fell an annualized 3.0 percent, following a 4.2 percent decline in the fourth quarter.

BEA also cited slower growth in inventory investment ""due to reduced inventory investment in manufacturing and wholesale industries"" and slower growth in fixed investment ""mainly due to slowdowns in industrial equipment, in computer and related equipment, and in power and communication structures.""

Residential fixed investment contributed $14.9 billion to the change in GDP, up from $9.1 billion in the fourth quarter. Overall, total residential fixed investment grew 19.1 percent in the first quarter, up from 11.6 percent in the fourth quarter. Non-residential fixed investment dropped 2.1 percent in the first quarter after growing 5.2 percent in the fourth quarter.

Inflation, according to the GDP price index, increased to a 1.5 percent annualized rate from 0.9 percent in the fourth quarter.

BEA issues three GDP reports for each quarter: an ""advance"" report one month after the quarter ends and revisions in each of the following months as more data are received.