US real GDP grew 2.2 percent in Q1 2012. The private setor grew 2.8 percent while government continued to shrink

1. Data for the Classroom from
Ed Dolan’s Econ Blog
http://dolanecon.blogspot.com/
US GDP: Private Economy
Grows 2.8% in Q1 2012,
Government Continues to
Shrink
Posted April 28, 2012
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2. Q1 GDP Grows at 2.2 percent, Private Sector at 2.8%
 US GDP growth slowed to 2.2% in
Q1 2012, down from 3% in Q4 2011,
according to the advance estimate
from the BEA
 The private sector grew at 2.8%
 It was the 11th consecutive quarter of
growth
 The advance estimate is based on
partial data and is often substantially
revised
Posted April 28, 2012 on Ed Dolan’s Econ Blog http://dolanecon.blogspot.com

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 April 28, 2012 on Ed Dolan’s Econ Blog http://dolanecon.blogspot.com

4. Sources of US GDP Growth in Q3 2011
Table shows the contribution
of each sector to the 2.2% total
 Consumption contributed 2.04 percentage GDP growth in Q1 2012
points to Q1 growth, up from 1.47 in Q4
 Investment slowed, but inventory
investment accounted for much less of the
total in Q1 than in Q4
 Government spending continued its steady
decline, led by defense cuts; state and local
government spending also fell
 Export growth contributed .73 percentage
points, up from .37 in Q4. Net exports were
flat
Posted April 28, 2012 on Ed Dolan’s Econ Blog http://dolanecon.blogspot.com

5. Government Continues to Shrink
Posted April 28, 2012 on Ed Dolan’s Econ Blog http://dolanecon.blogspot.com

6. Nominal GDP A Little Above Trend, Gap Remains Large
 Q1 nominal GDP (NGDP) growth was
3.8% (quarterly growth stated as
annual rate), the same as in Q4
 NGDP growth consisted of 2.2% real
growth and 1.6% 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 April 28, 2012 on Ed Dolan’s Econ Blog http://dolanecon.blogspot.com