The US economy slowed in the first quarter of the year, dropping from the previous quarter’s 3.0% to 2.2%, according to the latest report from the Department of Commerce:

Real gross domestic product — the output of goods and services produced by labor and property located in the United States — increased at an annual rate of 2.2 percent in the first quarter of 2012 (that is, from the fourth quarter to the first quarter), according to the “advance” estimate released by the Bureau of Economic Analysis. In the fourth quarter of 2011, real GDP increased 3.0 percent.

The Bureau emphasized that the first-quarter advance estimate released today is based on source data that are incomplete or subject to further revision by the source agency (see the box on page 3). The “second” estimate for the first quarter, based on more complete data, will be released on May 31, 2012.

The increase in real GDP in the first quarter primarily reflected positive contributions from personal consumption expenditures (PCE), exports, private inventory investment, and residential fixed investment that were partly offset by negative contributions from federal government spending, nonresidential fixed investment, and state and local government spending. Imports, which are a subtraction in the calculation of GDP, increased.

The deceleration in real GDP in the first quarter primarily reflected a deceleration in private inventory investment and a downturn in nonresidential fixed investment that were partly offset by accelerations in PCE and in exports.

Gross domestic purchases dropped even farther in Q1, from 3.1% in the previous period to 2.1%.  That demand fell even as current-dollar personal income rose 3.7% and disposable personal income increased 2.8%, both improvements over the previous quarter.  One explanation would probably be the rapid increase in gas prices, which ate away at disposable income, but nervousness over the economy probably also played some part.

Don’t expect too much from next quarter, either.  More than a quarter of the growth seen in Q1 can be attributable to inventory expansion.  Real final sales of domestic product, which excludes inventory expansion, only grew 1.6%, an improvement over 2011Q4’s 1.1% but still weak and indicative that demand isn’t keeping pace with production.  That will force discounting in future quarters to clear ever-increasing inventories, cutting into profits and weakening the job market even further.

Update: Not even Reuters can make this one look good, calling it “tepid” and noting that it missed expectations:

U.S. economic growth cooled in the first quarter as businesses cut back on investment and restocked shelves at a moderate pace, but stronger demand for automobiles softened the blow.

Gross domestic product expanded at a 2.2 percent annual rate, the Commerce Department said on Friday in its advance estimate, moderating from the fourth quarter’s 3 percent rate.

While that was below economists’ expectations for a 2.5 percent pace, a surge in consumer spending took some of the sting from the report. However, growth was still stronger than analysts’ predictions early in the quarter for an expansion below 1.5 percent.

Although the details were mixed, the GDP report offered a somewhat better picture of growth compared with the fourth quarter, when inventory building accounted for nearly two thirds of the economy’s growth. In the first quarter, demand from consumers took up the slack.

Actually, that last assertion is wrong.  If it were true, real final sales of domestic product would have equaled or surpassed the overall GDP number, and the growth in gross domestic purchases dropped by a third from last quarter.  I’m not sure what report Reuters was reading, but consumers didn’t “take up the slack.”  Inventory expansion still accounts for a quarter of the growth in the opening GDP period this year.

Politically speaking, this makes the White House’s “we’re on the right track” argument a little more difficult to make.  A 2.2% GDP rate won’t be a disaster on the stump, but the trend is going once again towards another Stagnant Spring.  If it gets revised downward in the next two months, Obama will have a tough time talking about the economy.  Expect a lot of discussion of dog carriers and condoms in the weeks ahead.