Initial GDP tops expectations but the consumer is still dead

Initial reads on the Commerce Department's GDP report this morning pointed to the headline figure -- a 1.0 percent annualized sequential drop -- as a sign the recession is coming to an end. While it's certainly true that the number beat expectations, looking deeper into the report reveals a few disconcerting data points. For example, the first quarter of 2009 was revised even lower, from a -6.1 percent GDP contraction to -6.4 percent. Notably absent was any sort of consumer demand, and the slack was largely picked up by spending from various levels of government.

Personal consumption spending fell 1.2 percent in the quarter, and equipment and software spending (a proxy for business investment) dropped almost nine percent. Imports were down 15.1 percent, and exports were off nine percent -- a combination that added to U.S. GDP, even though that's not encouraging for America or its trade partners. Barry Ritholtz calculates that, without the "boost" provided by the import/export difference, "GDP would have been -2.38 percent" -- far worse than expected.