The BLS reported that GDP grew at an annual rate of just 0.1 percent in Q4 2012

1. Economics for your Classroom from
Ed Dolan’s Econ Blog
Pace of US Recovery Slows
Sharply in Q4 2012
Posted Jan 30, 2012
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2. Q4 GDP Growth Slows Sharply
 The second estimate of US real GDP
for Q4 2012 showed growth at an
annual rate of just 0.1 percent
 Previously, January’s advance
estimate had shown a GDP falling at
a 0.1 percent rate for the quarter
 A third estimate will be available at
the end of March
February 28, 2013 Ed Dolan’s Econ Blog

3. Expansion Interrupted
 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 expansion continued in Q4 2012 but
at the slowest rate since Q1 2011
February 28, 2013 Ed Dolan’s Econ Blog

4. Sources of Growth by Sector
 Consumption contributed 1.47 percentage Contribution by sector to the
points to Q4 growth, just slightly below its 0.1% GDP growth in Q4 2012
recent average
 Investment contributed -0.2 percentage
points. Fixed investment was strong but
more than offset by falling inventories
 Exports contributed -0.55 percentage
points, the first quarterly decrease in
exports since Q1 2009. Net exports made a
positive contribution because imports fell
faster than exports
 The government sector also made a
negative contribution to growth; details on Note: Imports are recorded in the national
accounts with a negative sign, so the positive
the next side 0.79 percent shown here represents a
decrease in imports
February 28, 2013 Ed Dolan’s Econ Blog

5. Fiscal Drag Intensifies
 The government contribution to GDP
growth has been negative throughout
most of the recovery
 Government spending growth turned
positive in Q3 2012, but negative
growth returned in Q4 both at the
federal and at the state and local
levels
 Economists refer to the negative
impact on GDP of falling government
spending as fiscal drag. Political
gridlock over spending and taxes is
expected to increase fiscal drag in
2013
February 28, 2013 Ed Dolan’s Econ Blog

6.  For further
discussion of the
GDP data,
read this post
 Check out these
posts for more
slideshows and
analysis of US
macroeconomic
data:
 January 2012
inflation data
 January 2012
employment
situation
February 28, 2013 Ed Dolan’s Econ Blog

7.  For further
discussion of the
GDP data,
read this post
 Check out these
posts for more
slideshows and
analysis of US
macroeconomic
data:
 January 2012
inflation data
 January 2012
employment
situation
February 28, 2013 Ed Dolan’s Econ Blog