US Nominal GDP Growth Slows in Q2 Putting New Pressure on Fed


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US real GDP grew at 1.5% in Q2 2012 and nominal GDP growth slowed to 3.1 percent. Slow GDP growth puts additional pressure on the Fed to adopt a more expansionary policy stance

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US Nominal GDP Growth Slows in Q2 Putting New Pressure on Fed

  1. Data for the Classroom from Ed Dolan’s Econ Blog GDP Grow Slows in Q2 Putting New Pressure on the Fed Posted July 28, 2012 Terms of Use: These slides are made available 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 Publishers.
  2. Q2 Real GDP Growth Slows to 1.5 Percent US real GDP growth slowed to 1.5% in Q2 2012, down from 2% in Q1, according to the advance estimate from the BEA Revisions to earlier numbers raised the growth estimates for Q4 2011 and Q1 2012 The advance estimate is based on partial data and is subject to an average revision (disregarding sign) of 0.6 percentage points Posted July 28, 2012 on Ed Dolan’s Econ Blog
  3. Expansion Continues Q2 2012 was the 12th consecutive quarter of GDP growth 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. Q2 2012 GDP was solidly above pre- recession peak, continuing the expansion that the economy entered in Q3 2011 Posted July 28, 2012 on Ed Dolan’s Econ Blog
  4. Sources of US GDP Growth in Q2 2012 Consumption contributed 1.05 percentage Table shows the contribution points to Q2 growth, down sharply from Q1 of each sector to the 1.5% total GDP growth in Q2 2012 Investment contributed 1.08 percentage points to growth, slightly higher than in Q1, due to an increase in inventories Government spending continued its steady decline, led by state and local government, but the rate of decrease slowed compared to -0.8 percentage points in Q1 Export growth contributed .73 percentage points, up from Q1, but imports (a negative number in the accounts) increased even more strongly so net exports were also negative Posted July 28, 2012 on Ed Dolan’s Econ Blog
  5. Growth of NGDP Slows Q1 nominal GDP (NGDP) growth slowed sharply to 3.1 percent in Q2 from 4.2 percent in Q1 An increasing number of economists focus on NGDP growth as a key policy target Long term NGDP growth of 4.5 percent (2 percent inflation and 2.5 percent real growth) would represent good performance for the US economy The slowing growth of NGDP puts additional pressure on the Fed for more expansionary policy Posted July 28, 2012 on Ed Dolan’s Econ Blog