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US GDP Stalls in Q1 2014 as Fed Misses its Targets
 

US GDP Stalls in Q1 2014 as Fed Misses its Targets

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US GDP growth slowed to 0.1 percent in Q1 2014 while PCE inflation remained well below the Fed's target of 2 percent

US GDP growth slowed to 0.1 percent in Q1 2014 while PCE inflation remained well below the Fed's target of 2 percent

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    US GDP Stalls in Q1 2014 as Fed Misses its Targets US GDP Stalls in Q1 2014 as Fed Misses its Targets Presentation Transcript

    • Economics for your Classroom from Ed Dolan’s Econ Blog US GDP Growth Stalls as the Fed Misses its Targets by a Wide Margin Posted April 30, 2014 Terms of Use: These slides are provided under Creative Commons License Attribution—Share Alike 3.0 . You are free to use these slides as a resource for your economics classes together with whatever textbook you are using. If you like the slides, you may also want to take a look at my textbook, Introduction to Economics, from BVT Publishing.
    • April 30, 2014 Ed Dolan’s Econ Blog US GDP Growth Stalls in Q1 2014  The advance estimate from the Bureau of Economic Analysis released on April 30 showed that US real GDP grew at just a 0.1 percent annual rate in Q1 2014  That is a big decrease from 2.6 percent in Q4 and 4.1 percent in Q3  Harsh winter weather undoubtedly contributed to the downturn
    • Phases of the Business Cycle  According to standard business cycle terminology, the recession phase of the business cycle is the downward movement of GDP from its previous peak  The recovery phase is the upward movement from the trough (low point) of the recession and continues until GDP again reaches its previous peak.  Once GDP moves above its previous peak, the expansion phase begins.  The latest data show that the expansion is continuing. Real GDP is now 6.3 percent above the previous peak April 30, 2014 Ed Dolan’s Econ Blog
    • Sources of Growth by Sector  The slowdown was broadly based. The contribution from consumption was positive but lower than the 2.22 percentage points in Q3  Investment, including fixed, inventory, and residential, was negative  A decrease in expenditures of state and local government was only partly offset by an increase in Federal expenditures  Exports, which had been a strong point of the recovery, also turned negative Contribution by sector to the . 1% GDP growth in Q1 2014 Note: Imports are recorded in the national accounts with a negative sign, so the 0.24 percentage points shown here represent a decrease in imports April 30, 2014 Ed Dolan’s Econ Blog
    • Export Growth Plunges  Exports have played a leading role in GDP growth during much of the recovery  Beginning in Q2 2012, the growth of exports slowed, but then recovered again in the last three quarters of 2013  In Q1 2014, exports took a dive, turning in by far their worst performance since the depths of the recession April 30, 2014 Ed Dolan’s Econ Blog
    • State and Local Spending Turns Negative Again  Decreasing government spending, has been a negative influence on GDP growth for most of the past 3 years  In mid-2013, state and local government spending showed the first convincing growth for four years, more than offsetting the continued decrease in federal spending  In Q1 2014, the situation reversed, with S&L spending making a negative contribution that more than offset a tiny increase in federal government spending April 30, 2014 Ed Dolan’s Econ Blog
    • The Fed is Missing its Targets  The Federal Reserve has set targets of 5.5 percent unemployment and 2 percent inflation, as measured by the index for personal consumption expenditures  As this chart shows, unemployment has gradually decreased during the recovery, but inflation, at 1.4 percent in Q1, is still running well below its target  The arrow shows the trend since 2010, which is clearly on track to miss the bullseye April 30, 2014 Ed Dolan’s Econ Blog
    • Click here to learn more about Ed Dolan’s Econ texts or visit www.bvtpublishing.com For more slideshows, follow Ed Dolan’s Econ Blog Follow @DolanEcon on Twitter