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