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Home Publications Blogs CEPR Blog Declining Car Sales Cause GDP Growth to Sputter in Q1

Declining Car Sales Cause GDP Growth to Sputter in Q1

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Written by Dean Baker   
Thursday, 28 April 2011 10:31

In the first quarter of 2011 car sales advanced at a slower pace, causing GDP growth to fall from 3.1 percent in the fourth quarter of 2010 to 1.8 percent, according to the latest Bureau of Economic Analysis' report on the Gross Domestic Product. Declining sales slowed the rate of consumption growth from 4.0 to 2.7 percent. In addition, unusually bad weather had an effect on construction, subtracting 0.72 percentage points from growth in the quarter.

Investment in equipment and software, however, maintained strong growth, rising at an 11.6 percent annual rate. Equipment and software investment were equal to 7.4 percent of GDP in the quarter, just 0.5 percentage points below the pre-recession level. This is remarkably strong given the amount of excess capacity in most sectors of the economy. While it might not sustain its double-digit growth rate, it is likely to remain healthy throughout the year as the investment tax credit pulls investment forward.

For more information, read our latest GDP Byte.

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