US GDP Grows 2.4% in Q1, but Government and Export Sectors Weaken

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US GDP grew by 2.4% in Q1 2013 according to the second estimate from the BEA, but government expenditures decreased and export growth slowed

US GDP grew by 2.4% in Q1 2013 according to the second estimate from the BEA, but government expenditures decreased and export growth slowed

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  • 1. Economics for your Classroom fromEd Dolan’s Econ BlogUS GDP Grows 2.4 Percent inQ1 but Government andExports WeakenPosted May 30, 2013Terms of Use: These slides are provided under Creative Commons License Attribution—Share Alike 3.0 . You are freeto use these slides as a resource for your economics classes together with whatever textbook you are using. If you likethe slides, you may also want to take a look at my textbook, Introduction to Economics, from BVT Publishing.
  • 2. May 30, 2013 Ed Dolan’s Econ BlogUS GDP Grows at 2.4 Percent Rate in Q1 2013 The second estimate from theBureau of Economic Analysisshowed US GDP growing at a 2.4percent annual rate in the firstquarter of 2013, after a weak 0.4percent showing in Q4 2012 That was almost the same as the 2.5percent reported in last month’sadvance estimate for the quarter
  • 3. Expansion Resumes According to standard business cycleterminology, the recession phase of thebusiness cycle is the downwardmovement of GDP from its previouspeak The recovery phase is the upwardmovement from the trough (low point)of the recession and continues untilGDP again reaches its previous peak. Once GDP moves above its previouspeak, the expansion phase begins. The expansion resumed in Q1 2013after almost stalling in Q4 2012May 30, 2013 Ed Dolan’s Econ Blog
  • 4. Sources of Growth by Sector Consumption contributed 2.4 percentagepoints to Q4 growth, including both goodsand services Investment contributed 1.16 percentagepoints. Fixed investment was lower than inQ4 while inventories grew faster Exports contributed marginally to growthbut net exports were negative becauseimports grew faster than exports (details onSlide 5) The government sector also made anegative contribution to growth (details onSlide 6)Contribution by sector to the2.4% GDP growth in Q1 2013Note: Imports are recorded in the nationalaccounts with a negative sign, so thenegative 0.32 percent shown here representsan increase in importsMay 30, 2013 Ed Dolan’s Econ Blog
  • 5. Export Growth Slows Exports have been a source ofstrength throughout the recovery, butthey are weakening as the globaleconomy slows US exports fell in Q4 for the first timesince 2009, and they barely grew inQ1 2013May 30, 2013 Ed Dolan’s Econ Blog
  • 6. Fiscal Drag Continues The government contribution to GDPgrowth, as measured by governmentconsumption expenditure and grossinvestment, has been negativethroughout most of the recovery Government spending growth turnedpositive in Q3 2012, but negativegrowth returned in Q4 and continuedin Q1 2013 Economists refer to the negativeimpact on GDP of falling governmentspending as fiscal drag. Politicalgridlock over spending and taxes isexpected to increase fiscal drag laterthis yearMay 30, 2013 Ed Dolan’s Econ Blog
  • 7. Click here to learn more about Ed Dolan’s Econ textsor visit www.bvtpublishing.comFor more slideshows, follow Ed Dolan’s Econ BlogFollow @DolanEcon on Twitter