Revised Data Show Biggest Drop in US GDP in Five Years


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US real GDP decreased at an annual rate of 2.9 percent in Q1 2014, the fastest rate in 5 years, according to the latest revisions from the Bureau of Economic Analysis

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Revised Data Show Biggest Drop in US GDP in Five Years

  1. Economics for your Classroom from Ed Dolan’s Econ Blog Revisions Show Biggest Quarterly Drop in US GDP in Five Years Posted June 27, 2014 Terms of Use: These slides are provided 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 Publishing.
  2. June 27, 2014 Ed Dolan’s Econ Blog US GDP Falls in Q1 2014  The third estimate from the Bureau of Economic Analysis released on June 27 showed that US real GDP fell at an annual rate of 2.9 percent in Q1 2014  In May, the second estimate May had shown a decrease of 1 percent  Harsh winter weather undoubtedly contributed to the downturn, as did technical revisions to the way health care expenditures were measured
  3. Phases of the Business Cycle  According to standard terminology, the recession phase of the business cycle is the downward movement of GDP from its previous peak  It is common to refer to the first phase of growth following the trough (low point) of the recession as a recovery. During that phase, idle equipment goes back on line and workers return to their jobs.  Official reports call the entire growth phase of the cycle an expansion, but many writers apply that term only after GDP has reached its previous peak.  The latest data show that the expansion has stalled, although growth is expected to resume in the second quarter June 27, 2014 Ed Dolan’s Econ Blog
  4. Sources of Growth by Sector  Most of the downward revision was due to slower growth of consumption than previously estimated. A technical change in estimates of healthcare spending accounted for much of the slowdown  Most of the actual decrease in GDP was due to a decline in investment, especially a sharp drop in inventories  A decrease in expenditures of state and local government was only partly offset by an increase in Federal expenditures  Net exports, which had been a strong point of the recovery, were negative by an even greater margin than previously estimated Contribution by sector to the -2.9% GDP growth in Q1 2014 Note: Imports are recorded in the national accounts with a negative sign, so the -.27 percentage points shown here represent an increase in imports June 27, 2014 Ed Dolan’s Econ Blog
  5. Export Growth Plunges  Exports have played a leading role in GDP growth during much of the recovery  Beginning in Q2 2012, the growth of exports slowed, but then recovered again in the last three quarters of 2013  In Q1 2014, exports took a dive, turning in by far their worst performance since the depths of the recession June 27, 2014 Ed Dolan’s Econ Blog
  6. State and Local Spending Turns Negative Again  Decreasing government spending has been a negative influence on GDP growth for most of the past 3 years  In mid-2013, state and local government spending showed the first convincing growth for four years, more than offsetting the continued decrease in federal spending  In Q1 2014, the situation reversed, with S&L spending making a negative contribution that more than offset a tiny increase in federal government spending June 27, 2014 Ed Dolan’s Econ Blog
  7. Corporate Profits Drop Sharply  For most of the past two years, corporate profits have been running at or near record-high levels  Profits before tax fell 9.1 percent in Q1 2014 and profits after tax by 8.7 percent  Despite the sharp drop, corporate profits after tax remained above the peak reached during the boom that preceded the Great Recession June 27, 2014 Ed Dolan’s Econ Blog
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