US GDP Grows at 5 Percent in Q3 2014, Best of Recovery

Economics for your Classroom from Ed Dolan’s Econ Blog US GDP Grows at 5 Percent in Q3, Fastest Quarter of the Recovery Posted December 24, 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.

December 24, 2014 Ed Dolan’s Econ Blog US GDP Hits Fastest Pace of Recovery in Q3 2014  The third estimate from the Bureau of Economic Analysis released on December 23 showed that US real GDP grew at an annual rate of 5 percent in Q3 2014, the highest of the recovery  Previously, growth for the quarter had been estimated at 3.9 percent  This is the second quarter of strong growth, following 4.6 percent in Q2

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 8.1 percent above its pre-recession peak December 24, 2014 Ed Dolan’s Econ Blog

Sources of Growth by Sector  Consumption grew a little faster than in Q2 and well above its average for the past five years  Investment growth was a little above the 5- year average. Fixed investment accounted for most of that. Inventories were essentially unchanged  A burst of defense spending pushed the federal contribution to GDP growth higher  Exports, which have been a strong point of the recovery, grew at roughly their 5-year average rate. Imports decreased. Contribution by sector to the 5% GDP growth in Q3 2014 Note: Imports are recorded in the national accounts with a negative sign, so the +.16 percentage points shown here represent a decrease in imports December 24, 2014 Ed Dolan’s Econ Blog

US Economy Closes in on Fed’s Targets  The price index for personal consumption expenditures grew 1.2 percent from Q3 2013 to Q3 2014. The unemployment rate average 6.06 percent in Q3, although it had fallen to 5.8 percent by October  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 December 24, 2014 Ed Dolan’s Econ Blog

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