US GDP grew at a 2.5% annual rate in Q1 2013, up sharply from the 0.4% of Q4 2012

1. Economics for your Classroom from
Ed Dolan’s Econ Blog
US GDP Growth Accelerates
from a Crawl to a Walk in Q1
Posted April 16, 2013
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2. April 26, 2013 Ed Dolan’s Econ Blog
US GDP Growth rises to 2.5 Percent in Q1 2013
 The advance estimate from the
Bureau of Economic Analysis shows
US GDP growth rising to 2.5 percent
in the first quarter of 2013, after a
weak 0.4 percent showing in Q4
2012
 It was the fastest growth rate since
Q4 2011, and close to what many
analysts believe is the long-run
potential growth rate for the US
economy

3. Expansion Interrupted
 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.
 The expansion resumed in Q1 2013
after almost stalling in Q4 2012
April 26, 2013 Ed Dolan’s Econ Blog

4. Sources of Growth by Sector
 Consumption contributed 2.24 percentage
points to Q4 growth, mostly services
 Investment contributed 1.56 percentage
points. Fixed investment was lower than in
Q4 while inventories grew strongly
 Exports contributed positively to growth but
net exports were negative because imports
grew faster than exports
 The government sector also made a
negative contribution to growth; details on
the next side
Contribution by sector to the
2.5% GDP growth in Q1 2013
Note: Imports are recorded in the national
accounts with a negative sign, so the
negative 0.9 percent shown here represents
an increase in imports
April 26, 2013 Ed Dolan’s Econ Blog

5. Fiscal Drag Continues
 The government contribution to GDP
growth, as measured by government
consumption expenditure and gross
investment, has been negative
throughout most of the recovery
 Government spending growth turned
positive in Q3 2012, but negative
growth returned in Q4 and continued
in Q1 2013
 Economists refer to the negative
impact on GDP of falling government
spending as fiscal drag. Political
gridlock over spending and taxes is
expected to increase fiscal drag later
this year
April 26, 2013 Ed Dolan’s Econ Blog

6.  For further
discussion of the
GDP data, read
this post
 Check out these
posts for more
slideshows and
analysis of US
macroeconomic
data:
 March 2013
inflation data
 March 2013
employment
situation
April 26, 2013 Ed Dolan’s Econ Blog

7.  For further
discussion of the
GDP data, read
this post
 Check out these
posts for more
slideshows and
analysis of US
macroeconomic
data:
 March 2013
inflation data
 March 2013
employment
situation
April 26, 2013 Ed Dolan’s Econ Blog