Successfully reported this slideshow.
We use your LinkedIn profile and activity data to personalize ads and to show you more relevant ads. You can change your ad preferences anytime.

US GDP Growth Weak in Q4 But Profits Strong


Published on

US GDP growth was a weak 0.4 percent in Q4 2012 but corporate profits were near their record highs

Published in: Business
  • Be the first to comment

  • Be the first to like this

US GDP Growth Weak in Q4 But Profits Strong

  1. Economics for your Classroom from Ed Dolan’s Econ Blog New Data Show US GDP Growth Weak at Year’s Endbut Profits Near Record Highs Posted March 29, 2013 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.
  2. US Economy Barely Grows in Q4 2012 The third estimate of US real GDP for Q4 2012 showed growth at an annual rate of just 0.4 percent That is only slightly better than the 0.1 percent reported in the second estimate The advance estimate of Q1 2013 GDP will be available at the end of April March 29, 2013 Ed Dolan’s Econ Blog
  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 continued in Q4 2012 but at the slowest rate since Q1 2011 March 29, 2013 Ed Dolan’s Econ Blog
  4. Sources of Growth by Sector Consumption contributed 1.28 percentage Contribution by sector to the points to Q4 growth, slightly below its 0.4% GDP growth in Q4 2012 recent average Investment contributed 0.17 percentage points. Fixed investment was strong but more than offset by falling inventories Exports contributed -0.4 percentage points, the first quarterly decrease in exports since Q1 2009. Net exports made a positive contribution because imports fell faster than exports The government sector also made a negative contribution to growth; details on Note: Imports are recorded in the national accounts with a negative sign, so the positive the next side 0.73 percent shown here represents a decrease in imports March 29, 2013 Ed Dolan’s Econ Blog
  5. Fiscal Drag Intensifies 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 both at the federal and at the state and local levels 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 in 2013 March 29, 2013 Ed Dolan’s Econ Blog
  6. Corporate Profits Near Record Highs Despite slow GDP growth, corporate profits, both before and after taxes, were near their record highs, expressed as a percentage of GDP The ability of US corporations to squeeze out rising profits in a weak economy no doubt helps to explain the recent strong performance of the stock market March 29, 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: February 2013 inflation data February 2013 employment situation March 29, 2013 Ed Dolan’s Econ Blog