Commerce Department Releases Q1 GDP

Advance estimates by the Commerce Department for gross domestic product (GDP) growth came in at 2.5% for the first quarter of the year. This shows a marked increase from the fourth quarter of 2012, when real GDP growth grew at just a 0.4% annual clip. To be clear, today's numbers aren't final, and a second estimate of first quarter GDP will be announced on May 30. Revised estimates, on average, differ from "advanced" estimates like today's by 0.5%.

First-quarter GDP was aided by an uptick in real personal consumption expenditures, which increased 3.2% in the first quarter. While exports also rose by 2.8%, helping boost GDP, a 5.4% rise in the value of imported goods and services -- imports subtract from GDP -- offset the gains made there.

A few major factors that kept GDP growth at sub-3% levels were decreases in government spending and falling personal income. Since increases in consumer spending and higher government spending are both boons to GDP, the fact that government consumption sank 8.4% and personal income dropped 3.2% weakened growth figures. The Commerce Department notes that a major reason for the drop in personal income stems from the expiration of the payroll tax "holiday," resulting in higher contributions to government social insurance.

Stocks traded moderately lower after the data release on Friday morning.


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