US GDP grew at a 3.5 annual rate in Q3 2014. Following 4.6 percent growth in Q2, that makes the strongest six-month period of the recovery

1. Economics for your Classroom from
Ed Dolan’s Econ Blog
US GDP Grows at 3.5 Percent
in Q3 for Best Six-Month Run
of the Recovery
Posted October 30, 2014
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2. US GDP Growth Remains Strong in Q3 2014
 The advance estimate from the
Bureau of Economic Analysis
released on October 30 showed
that US real GDP grew at an annual
rate of 3.5 percent in Q3 2014
 Following an exceptional 4.6 growth
rate in Q2, that makes it the best
half-year performance for the
recovery
October 30, 2014 Ed Dolan’s Econ Blog

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.
 Real GDP is now 7.7 percent higher
than its pre-recession peak
October 30, 2014 Ed Dolan’s Econ Blog

4. Sources of Growth by Sector
 Consumption grew slightly slower than in
Q2, but only a little below its average for
the recovery
 Investment slowed sharply in Q3, mostly
because inventory investment turned from
positive to negative
 An unusual burst of defense spending
pushed the federal contribution to GDP
growth higher
 Exports, which have been a strong point of
the recovery, continued to grow strongly
while imports decreased
Contribution by sector to the
3.5% GDP growth in Q3 2014
Note: Imports are recorded in the national
accounts with a negative sign, so the +.29
percentage points shown here represent a
decrease in imports
October 30, 2014 Ed Dolan’s Econ Blog

5. Exports Show Another Quarter of Good Growth
 Exports have been a strong point in the
US economy throughout most of the
recovery
 Exports dropped sharply in the winter,
due in part to unusually bad weather
 They recovered in Q2 and showed
continued strong growth in Q3, all the
more remarkable in view of the weak
economies of several US trading
partners
October 30, 2014 Ed Dolan’s Econ Blog

6. US Economy Closes in on Fed’s Targets
 The price index for personal
consumption expenditures grew
at a 1.2 percent annual pace in
Q3
 The Fed defines its policy targets
as 2 percent inflation measured
by the PCE deflator and 5.25 to
5.75 percent unemployment
 Both of those indicators fell within
of plus or minus one percentage
point of the targets as of Q3 2014
October 30, 2014 Ed Dolan’s Econ Blog

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