The Bureau of Economic Analysis (BEA) released the final estimate of real GDP growth for the first quarter of 2011, revising growth up to a seasonally adjusted annual rate of 1.9 percent. This is a sharp deceleration from the growth rate of 3.1 percent in the fourth quarter of 2010. The leading causes were a slowdown in personal consumption expenditures (PCE), from 4.0 to 2.2 percent, and an increase in imports (which subtracts from GDP growth), which rose by 5.1 percent after declining by 12.6 percent in the fourth quarter of 2010. Declining government spending at the federal, state and local levels also subtracted from GDP growth.

This deceleration pushes the current recovery into a tie for last place among the last eight recession/recovery cycles at this stage of the recovery. A technical exception is the recovery following the 1980 recession that turned into the 1981-82 recession. Seven quarters after the end of the recession cumulative GDP growth has been 5.0 percent, comparable to the recovery following the tech bubble boom and bust. This is in contrast to the 8-13 percent growth following earlier recessions.

We anticipate growth will accelerate in the second half of the year, as do most forecasters, including the Federal Reserve, although most forecasts for the near term have been revised downward recently. Our forecast for GDP growth for the balance of 2011 and 2012 keeps the current recovery on track with the last two recoveries, and is at the low end of the most recent Federal Reserve forecast range.