Expected U.S. GDP Growth Rate Victoria Rock AIU Online BUSN300-1202A-15
AbstractBeing a newly appointed President for the local Chamber of Commerce, a presentation on theExpected U.S. GDP growth will be examined and explained.
IntroductionIn this paper the GDP growth rate of the U.S. will be examined through trends, forcasts, andstatistics. Also how the GDP is determined and interpreted.
Expected U.S. GDP Growth Rate The value of the U.S. GDP has continued to increase in value and the year with the highestvalue recorded was in 2010 at $14,526.5 billion dollars. (National Income and Product AccountsTable, 2012). However, the rate of growth in GDP has varied. There are periods when the GDPincreases at an increased rate while others have a negative growth. A graph of GDP against years 16,000.00 GDP (Billions of dollars) 14,000.00 12,000.00 10,000.00 8,000.00 6,000.00 4,000.00 2,000.00 0.00 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 Years Series1 As you can tell in the next chart in our analyses we reviewed the annual GDP growth from1991 to 2010, and can see alternate cycles of increase and decrease with the highest growth raterecorded in 2000. The economy registered a boom between 1998 and 2000 which shows anincrease of 6.39% in 2000. In 2001 GDP growth was recorded at 3.36%, 2002 at 3.46%, 2003 at4.70%, and 2004 at 6.38%, with the highest growth occurring in 2005 at 6.49%. From 2005 to
2009 the economy experienced a recession and the GDP decreased at a diminishing rate. TheAnnual growth registered amounted to 5.97% in 2006, 4.87% in 2007, 1.87% in 2008, and thelowest in 2009 at -2.47%. Decline in GDP can be attributed to reduced personal consumptionexpenditures which is the main component contributing to the GDP. However in 2010 theeconomy started to improve and growth was recorded at 4.21%. (Economic Expansion (GDP),2011) Annual GDP growth 8.00% 6.00% %age change in GDP 4.00% 2.00% 0.00% 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 -2.00% -4.00% Years The Economic Times stated that the Federal Reserve cut its forecasts for the US economicgrowth from 3.1 to 3.3 percent down to 2.7 to 2.9 percent and sees 2012 growth in a 3.3 to 3.7percent range. The slowed growth was being attributed to increasing inflation due to factorspushing up the price of commodities. The slow pace is also attributed to higher prices of foodand energy which will lead to a reduced consumer purchasing power. (Federal Reserve cuts USGDP forecast; no hint of more support, 2011) Global Finance has provided various statistics in relation to GDP which includes informationthat the GDP per capita in the US amounted to $48,666 based on 2010 figures. The service
sector is the main contributor to the GDP accounting for 76.9%, manufacturing at 21.9%, andagriculture sector at 1.2% and is based on GDP values for 2009. (DATA ON GDP ANDECONOMIC INFORMATION, 2011) Real GDP for the past ten years 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010Real 4.1% 1.1% 1.8% 2.5% 3.6% 3.1% 2.7% 1.95 0% -2.6% 2.8%GDPNote: Reprinted from the United States Country Report by Global Finance, 2011 How GDP is determined There are two ways in which the GDP can be calculated; the income approach which iscalculated by adding up total compensation to employees, gross profits for firms, and taxes lessany subsidies.GDP = compensation of employees + gross profit for firms + taxes – subsidiesThe expenditure method is the more common approach and is calculated by adding totalconsumption, investment, government spending and net exports less imports.GDP = personal consumption + government spending + investments + exports – imports
Interpreting GDP A positive Real GDP number reflects a growing economy while a negative GDP reflects adeclining economy like what we saw in 2009. When you have two consecutive quarters of GDPdecline it generally is associated with a recession. (Economic Expansion (GDP), 2011)
ReferenceDATA ON GDP AND ECONOMIC INFORMATION. (2011). Retrieved from Global Finance: http://www.gfmag.com/gdp-data-country-reports/151-the-united-states-gdp-country- report.html#axzz1s9ytNMshEconomic Expansion (GDP). (2011, December). Retrieved from Russell Investments: http://www.russell.com/helping- advisors/Markets/EconomicIndicatorsDashboard/EconomicExpansion-GDP.aspxFederal Reserve cuts US GDP forecast; no hint of more support. (2011, June 23). Retrieved from The Economic Times: http://economictimes.indiatimes.com/news/international-business/federal- reserve-cuts-us-gdp-forecast-no-hint-of-more-support/articleshow/8956240.cmsNational Income and Product Accounts Table. (2012, March 29). Retrieved from Bureau of Economic Analysis: http://www.bea.gov/National/Nipaweb/Tableview.Asp?Selectedtable=5&Viewseries=NO&Java= No&Request3Place=N&3Place=N&Fromview=YES&Freq=Year&Firstyear=1990&Lastyear=2010What is GDP and why is it so important? (2007, September 19). Retrieved from Investopedia: http://www.investopedia.com/Ask/Answers/199.Asp#Axzz1aeuepbgk