The headline figure for US GDP growth in the final quarter of 2010 was perhaps slightly higher than expected given the slowdown in Europe and Japan, at an annualised rate of 3.1 per cent. But a closer look at the components of GDP reveals an underlying weakness in the US economy. Domestic demand stagnated in the final quarter of 2010, and the strong rise in GDP is entirely attributable to a 12.6 per cent (annualised) contraction in import volumes. The slowdowns in Europe and Japan should be seen as at least partly attributable to this loss of demand from the US, which remains the world's largest importer of goods and services, accounting for about 12½ per cent of world trade (see Appendix figure B3). Available information for the first quarter of 2011 suggests that consumer spending growth moderated to about 1½ per cent at an annualised rate, and we expect GDP growth in the US to average about 2½ per cent per annum this year and next.