The US Bureau of Economic Analysis revised US GDP growth in the first quarter of 2013 down to 1.8% from the previous estimate of 2.4%. This represents a slower rate of growth than the previous quarter. Exports declined for the second consecutive quarter as the global economy slowed, while government spending cuts continued to drag on overall growth, referred to as "fiscal drag". Consumption remained the largest contributor to growth.

1. Economics for your Classroom from
Ed Dolan’s Econ Blog
US GDP Growth Revised
Down to 1.8 Percent
on Falling Exports
Posted June 26, 2013
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2. June 26, 2013 Ed Dolan’s Econ Blog
US GDP Grows at 1.8 Percent Rate in Q1 2013
 The third estimate from the Bureau
of Economic Analysis showed US
GDP growing at a 1.8 percent annual
rate in the first quarter of 2013.
 That was a decrease of 0.6
percentage points from the second
estimate, 2.4 percent, released last
month.
 The average revision from the
second to third estimates,
disregarding sign, is 0.2 percentage
points

3. Expansion Resumes
 According to standard business cycle
terminology, the recession phase of the
business cycle is the downward
movement of GDP from its previous
peak
 The recovery phase is the upward
movement from the trough (low point)
of the recession and continues until
GDP again reaches its previous peak.
 Once GDP moves above its previous
peak, the expansion phase begins.
 The expansion resumed in Q1 2013
after almost stalling in Q4 2012
June 26, 2013 Ed Dolan’s Econ Blog

4. Sources of Growth by Sector
 Consumption contributed 1.83 percentage
points to Q4 growth, including both goods
and services
 Investment contributed 0.96 percentage
points. Fixed investment was lower than in
Q4 while inventories grew faster
 Exports contributed decreased for the
second consecutive quarter, partly offset by
a decrease in imports (details on Slide 5)
 The government sector also made a
negative contribution to growth (details on
Slide 6)
Contribution by sector to the
1.8% GDP growth in Q1 2013
Note: Imports are recorded in the national
accounts with a negative sign, so the +0.6
percent shown here represents a decrease in
imports
June 26, 2013 Ed Dolan’s Econ Blog

5. Export Growth Turns Negative
 Exports have been a source of
strength throughout the recovery, but
they are now falling as the global
economy slows
 US exports fell in Q1 for the second
consecutive quarter
June 26, 2013 Ed Dolan’s Econ Blog

6. Fiscal Drag Continues
 The government contribution to
GDP growth, as measured by
government consumption
expenditure and gross investment,
has been negative throughout most
of the recovery
 Government spending growth
turned positive in Q3 2012, but
negative growth returned in Q4 and
continued in Q1 2013
 Economists refer to the negative
impact on GDP of lower government
spending as fiscal drag. Political
gridlock over spending and taxes is
expected to lead to continued fiscal
drag throughout this year
June 26, 2013 Ed Dolan’s Econ Blog

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