As Exports Soar, US Economy Closes in on Fed's Targets
1. Economics for your Classroom from
Ed Dolan’s Econ Blog
As Exports Soar, US Economy
Closes In on Fed’s Targets
Posted September 26, 2014
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2. September 26, 2014 Ed Dolan’s Econ Blog
US GDP Growth in Q2 2014 Strongest in Four Years
The third estimate from the Bureau
of Economic Analysis released on
September 26 showed that US real
GDP grew at an annual rate of 4.6
percent in Q2 2014
That is even faster than the 4.2
percent previously reported, and is
the best performance in four years
3. 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.
The latest data show that the expansion
resumed in Q2 2014 after a winter
downturn
September 26, 2014 Ed Dolan’s Econ Blog
4. Sources of Growth by Sector
The renewed growth of GDP in Q2 2014
was broadly based
Consumption grew at a slightly faster than
average pace
Investment enjoyed one of its strongest
quarters in years
An increase in expenditures of state and
local government more than offset a slight
decrease in Federal expenditures
Exports, which have been a strong point of
the recovery, grew even more rapidly than
previously reported
Contribution by sector to the
4.6% GDP growth in Q2 2014
Note: Imports are recorded in the national
accounts with a negative sign, so the -.1.77
percentage points shown here represent an
increase in imports
September 26, 2014 Ed Dolan’s Econ Blog
5. Exports Show Best Growth in Four Years
Exports have been a strong point in the
US economy throughout most of the
recovery
Exports dropped sharply in the winter,
due in part to unusually bad weather
They recovered in Q2, showing their
strongest growth in two years, all the
more remarkable in view of the weak
economies of several US trading
partners
September 26, 2014 Ed Dolan’s Econ Blog
6. US Economy Closes in on Fed’s Targets
The price index for personal
consumption expenditures grew
at a 2.3 percent annual pace in
Q2
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 midyear
September 26, 2014 Ed Dolan’s Econ Blog
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