Nation's GDP grows at 3.2% rate in first quarter

The growth rate released by the Commerce Department is modest, but a dramatic improvement over the same period last year, and is seen as an indication that a steady recovery has taken hold. Obama touts the news.
Jim Puzzanghera, Los Angeles Times

April 30, 2010 | 9:17 a.m.

Reporting from Washington
The economy grew 3.2% in the first quarter of the year, the Commerce Department reported Friday, another indication a steady, though modest, recovery has taken hold.

The annualized rate of growth of the gross domestic product -- the nation's total production of goods and services -- was down from the 5.6% rate of the last three months of 2009. But that had been expected as the effect of the federal government's stimulus policies peaked during that period.

"We're still running on the fumes of stimulus in the U.S. economy," said Diane Swonk, chief economist at Mesirow Financial in Chicago. "It's a recovery, but by any standard is still a muted recovery. But we're thankful to have what we've got," given the depth of the recession, she said.

The median forecast for first quarter GDP was 3.4%, according to a survey of economists by Thomson Reuters, and Friday's figure fell below that. But that projection reflected more bullish sentiment about the economy in recent weeks. The National Assn. of Business Economics had forecast in February that first-quarter GDP would be 3%.

The GDP growth rate released Friday by the Commerce Department's Bureau of Economic Analysis is only modest, but still is a dramatic improvement over the same period last year. At the bottom of the recession, the U.S. economy shrank 6.4% in the first quarter of 2009.

That was the low point for the deepest recession since the 1930s, which began in December 2007. Economic growth returned last summer when the third-quarter GDP increased at an annualized rate of 2.2%.

President Obama touted the good economic news during a White House appearance, calling it "an important milepost on our road to recovery."

"What this number means is that our economy as a whole is in a much better place than it was one year ago. The economy that shrank for four quarters in a row has now grown for three quarters in a row," he said. "After the single biggest economic crisis in our lifetimes, we're heading in the right direction. We're moving forward."

Swonk said the first-quarter figure was in line with expectations.

"The recovery's more broad-based," she said. "Although the momentum slowed quite a bit from the fourth quarter, the consumer showed up and we had a lot of demand, which is good."

The Bureau of Economic Analysis said growth was boosted in the first quarter by consumer spending. Real personal consumption expenditures increased 3.6%, compared with a 1.6% increase in the last three months of 2009.

Despite three straight quarters of economic growth, the recession still has not been declared officially over. The National Bureau of Economic Research, which determines the lengths of business cycles, said this month that it "would be premature" to set a date marking the end of the recession and the start of an economic expansion.

A major reason for that decision was the still-high unemployment rate.

Although job growth returned in March, with the economy creating 162,000 jobs, the national unemployment rate remained at 9.7%. The figure is higher in many states, including California, which reached a new high of 12.6% in March, tied for third-worst in the nation. The state trailed only Michigan's 14.1% jobless rate and Nevada's 13.4% figure, and was tied with Rhode Island.

"At the end of the day, none of this really matters unless we can get the employment machine going, which is coming, but very slowly," Swonk said.

Obama stressed the importance of adding more jobs to making the recovery real for average Americans.

Our economy is stronger. That economic heartbeat is growing stronger. But I measure progress by a different pulse, the progress the American people feel in their own lives, day in, day out," he said. "For millions of Americans -- our friends, neighbors and fellow citizens ready and willing to get back to work – ‘You're hired' is the only economic news they're waiting to hear. And they are why the work of moving this economy forward remains our focus every single day."

jim.puzzanghera@latimes.com

http://www.latimes.com/business/la-fi-g ... 4504.story