US GDP Growth Holds at 2.5% in Q2, Profits Strong, Key Inflation Index Falls

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US GDP grew at 2.5 percent in Q2, unchanged from the previous estimate. Corporate profits reached an all-time nominal high and returned to within a fraction of their previous high as a percent of GDP. …

US GDP grew at 2.5 percent in Q2, unchanged from the previous estimate. Corporate profits reached an all-time nominal high and returned to within a fraction of their previous high as a percent of GDP. The personal consumption deflator fell by 0.1 percent.

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  • 1. Economics for your Classroom from Ed Dolan’s Econ Blog US GDP Growth for Q2 Holds at 2.5 Percent, Profits High, Key Inflation Index Falls Posted September 27, 2013 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.
  • 2. September 27, 2013 Ed Dolan’s Econ Blog US GDP Grows at 2.5 Percent Rate in Q2 2013  The third estimate from the Bureau of Economic Analysis showed US GDP growing at a 2.5 percent annual rate in the second quarter of 2013.  That was the same as the second estimate, reported in August, and up from 1.1 percent in Q1 2013
  • 3. 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 gaining strength again after a slowdown in late 2012 September 27, 2013 Ed Dolan’s Econ Blog
  • 4. Sources of Growth by Sector  Consumption contributed 1.24 percentage points to Q2 growth, a little below average for recent quarters  Investment contributed 1.38 percentage points. Fixed investment was a little stronger than previously estimated while while inventories grew a little slower  Exports grew strongly but imports increased more than exports, so the contribution of net exports was negative  The government sector also made a negative contribution to growth, but the decrease was fractionally smaller than previously reported. Contribution by sector to the 2.5% GDP growth in Q2 2013 Note: Imports are recorded in the national accounts with a negative sign, so the -1.10 percentage points shown here represent an increase in imports September 27, 2013 Ed Dolan’s Econ Blog
  • 5. Exports Show Renewed Growth after a Pause  Exports played a leading role in GDP growth during the early part of the recovery  Beginning in Q2 2012, weakness in many US trading partners slowed the growth of exports  The data for Q2 show renewed strength in the export sector, in defiance of global trends September 27, 2013 Ed Dolan’s Econ Blog
  • 6. Inflation Indicators Fall Sharply  In addition to data on GDP and its components, the national income accounts include a number of inflation indicators  The broadest is the GDP deflator, which reflects changes in the prices of all GDP components  Another is the deflator for personal consumption expenditure, an alternative to the more widely publicized consumer price index. The Fed pays particular importance to the PCE deflator  The PCE deflator decreased in Q2 by at a 0.1 percent annual rate September 27, 2013 Ed Dolan’s Econ Blog
  • 7. Corporate Profits Continue Strong  Corporate profits reached a record high in nominal terms in Q2. As a percent of GDP, they returned to within a fraction of their previous high, after a slight dip earlier this year.  Corporate profits have consistently grown faster than GDP during the recovery September 27, 2013 Ed Dolan’s Econ Blog
  • 8. 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