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GDP Growth Remains Slow in Q1 2012, Corporate Profits Fall


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US GDP growth remained slow in Q1 2012 and corporate profits fell for the first time since mid-2008

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GDP Growth Remains Slow in Q1 2012, Corporate Profits Fall

  1. Data for the Classroom from Ed Dolan’s Econ Blog US GDP Grows Slowly,Corporate Profits Fall onSlowing World Economy Posted June 29, 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. Q1 GDP Grows at 1.9 Percent in Q1 2012 US GDP growth slowed to 1.9% in Q1 2012, down from 3% in Q4 2011, according to the third estimate from the BEA The advance estimate released in April had shown growth of 2.2% It was the 11th consecutive quarter of growth Posted June 29, 2012 on Ed Dolan’s Econ Blog
  3. Expansion Continues 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. Q1 2012 GDP was solidly above pre- recession peak, continuing the expansion that the economy entered in Q3 2011 Posted June 29, 2012 on Ed Dolan’s Econ Blog
  4. Sources of US GDP Growth in Q1 2012 Consumption contributed 1.74 percentage Table shows the contribution of each sector to the 1.9% total points to Q1 growth, slightly less than GDP growth in Q1 2012 previously estimated Investment contributed .84 percentage points to growth, slightly higher than previously reported Government spending continued its steady decline, led by defense cuts; state and local government spending also fell Export growth contributed just .58 percentage points, much less than the .98 percent reported in the second estimate released in May Posted June 29, 2012 on Ed Dolan’s Econ Blog
  5. Contribution of Government to GDP Continues to ShrinkPosted June 29, 2012 on Ed Dolan’s Econ Blog
  6. Nominal GDP Gap Remains Large Q1 nominal GDP (NGDP) growth was 3.9% (quarterly growth stated as annual rate), about the same as in Q4 NGDP growth consisted of 2.9% real growth and 2.0% inflation An increasing number of economists focus on NGDP growth as a key policy target. Real potential GDP growth has averaged about 2.3 percent over the past 10 years. Adding 2 percent for the Fed’s target rate of inflation gives 4.3 percent. NGDP targeters could thus make a case for a more stimulative policy Posted June 29, 2012 on Ed Dolan’s Econ Blog
  7. Corporate Profits Decline on Slowing World Economy BEA data show that corporate profits decreased in Q1 2012 for the first time since they hit their cyclical low in mid-2008 A decrease in foreign profits than offset growth of domestic profits to bring the total down Corporate profit tax revenue increased sharply, widening the gap between before and after tax profits Posted June 29, 2012 on Ed Dolan’s Econ Blog