US GDP growth was 3.0 percent in Q4 2011, according to the final estimate, but GDI grew more strongly, at 4.4 percent

1. Data for the Classroom from
Ed Dolan’s Econ Blog
http://dolanecon.blogspot.com/
US Gross Domestic
Income Growth Outpaces
GDP
Posted March 31, 2012
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2. Q4 GDP Grows at 3 percent
 US GDP growth accelerated to 3% in
Q4 2011, the fastest rate in a year
and a half, according to the final
estimate from the BEA.
 It was the 10th consecutive quarter of
growth, good news for the White
House as the election season heats
up
 The final estimate was unchanged
from the second estimate, released
in February. It is not really “final;” it
may be subject to further revision in
the future
Posted Mar. 31, 2012 on Ed Dolan’s Econ Blog http://dolanecon.blogspot.com

3. Economy Moves Solidly Into Expansion
 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.
 Q3 GDP was only slightly (0.04%) above
its pre-recession peak. In Q4, the
economy moved solidly into expansion
Posted Mar. 31, 2012 on Ed Dolan’s Econ Blog http://dolanecon.blogspot.com

4. Sources of US GDP Growth in Q3 2011
Table shows the contribution
 Consumption contributed strongly to Q4 of each sector to the 3% total
growth, led by strong motor vehicle sales GDP growth in Q4, 2011
 Investment accounted for most of the gain
in Q4 growth, as private inventory
investment rebounded from negative
growth in Q3
 Federal government spending fell sharply,
led by defense cuts; state and local
government spending also fell
 Export growth was revised down slightly
from the second estimate. Net exports were
a drag on growth in Q4
Posted Mar. 31, 2012 on Ed Dolan’s Econ Blog http://dolanecon.blogspot.com

5. Nominal GDP A Little Above Trend, Gap Remains Large
 The estimate of nominal GDP (NGDP)
growth was revised downward slightly
to 3.8% (quarterly growth stated as
annual rate)
 NGDP growth consisted of 3.0% real
growth and 0.8% 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 Mar. 31, 2012 on Ed Dolan’s Econ Blog http://dolanecon.blogspot.com

6. GDI Grows at 4.4%, Outpacing GDP
 An unusual feature of the Q4 2012
data was the strong growth of Gross
Domestic Income
 GDP is the sum of expenditures
consumption, investment, government
purchases, and net exports
 GDI comes from a different data set on
household income, corporate profits,
proprietors income, net interest, and
other elements
 In theory, the two are equal, and
usually they move more closely
together than in recent quarters
Posted Mar. 31, 2012 on Ed Dolan’s Econ Blog http://dolanecon.blogspot.com