US GDP Grows Faster in Q4 but Output Gap Remains Wide

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US real GDP growth accelerated to 2.8 percent in Q4 2011 from 1.8 percent in Q3, but the output gap remained wide.

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US GDP Grows Faster in Q4 but Output Gap Remains Wide

  1. Data for the Classroom from Ed Dolan’s Econ Blog http://dolanecon.blogspot.com/ US GDP Grows Faster in Q4 but Output Gap Remains Wide Posted Jan. 27, 2012 Terms of Use: These slides are made available 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 Publishers.
  2. US GDP Growth Stronger in Q4 2011 <ul><li>US GDP growth accelerated to 2.8% in Q4 2011, the fastest rate in a year and a half, according to the advance estimate released today </li></ul><ul><li>It was the 10 th consecutive quarter of growth, good news for the White House as the election season heats up </li></ul><ul><li>Caution: The advance estimate is subject to revision; Q3 growth, originally reported at 2.5%, was eventually revised down to 1.8% </li></ul>Posted Jan. 27, 2012 on Ed Dolan’s Econ Blog http://dolanecon.blogspot.com
  3. Economy Finally Moves Solidly Into Expansion <ul><li>According to standard business cycle terminology, the recession phase of the business cycle is the downward movement of GDP from its previous peak </li></ul><ul><li>The recovery phase is the upward movement from the trough (low point) of the recession and continues until GDP again reaches its previous peak. </li></ul><ul><li>Once GDP moves above its previous peak, the expansion phase begins. </li></ul><ul><li>Q3 GDP was only slightly (0.04%) above its pre-recession peak. Now, in Q4, the economy has moved solidly into expansion </li></ul>Posted Jan. 27, 2012 on Ed Dolan’s Econ Blog http://dolanecon.blogspot.com
  4. Sources of US GDP Growth in Q3 2011 <ul><li>Consumption contributed strongly to Q4 growth, as it did all year </li></ul><ul><li>Investment accounted for most of the gain in Q4 growth; however, the largest component was inventory accumulation (1.95%), not fixed investment </li></ul><ul><li>Federal government spending fell sharply, led by defense cuts; state and local government spending also fell </li></ul><ul><li>Exports continued their strong growth but imports (a negative entry in the accounts) grew even faster, so net exports were a small drag on growth in Q4 </li></ul>Posted Jan. 27, 2012 on Ed Dolan’s Econ Blog http://dolanecon.blogspot.com Table shows the contribution of each sector to the 2.8% total GDP growth in Q4, 2011
  5. Nominal GDP Growth Equals Trend, Gap Remains Large <ul><li>The estimate of nominal GDP (NGDP) growth was 3.2% in Q4 (quarterly growth stated as annual rate) </li></ul><ul><li>NGDP growth consisted of 2.8% real growth and 0.4% inflation </li></ul><ul><li>An increasing number of economists focus on NGDP growth as a key policy target. The Q4 NGDP growth of 3.2% was slightly slower than the 3.3% estimated growth of potential NGDP as reported by the St. Louis Fed </li></ul><ul><li>The data suggest that significantly faster growth of NGDP would be consistent with the Fed’s 2% target for the rate of inflation </li></ul>Posted Jan. 27, 2012 on Ed Dolan’s Econ Blog http://dolanecon.blogspot.com

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