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Data for the Classroom from
     Ed Dolan’s Econ Blog
http://dolanecon.blogspot.com/

   Latest GDP Revision
Carries Mixed Message for
 Election: Economy Weak
    but Profits Strong
           Posted Sept. 29, 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.
Q2 Real GDP Growth Estimate Falls to 1.3 Percent




 The third estimate of US real GDP
  growth for Q2 2012 showed output
  increasing at an annual rate of just
  1.3%
 Growth had previously been reported
  at 1.7% in the second estimate
  released at the end of August
 It was the slowest growth since Q3
  2011




           Posted Sept. 29, 2012 on Ed Dolan’s Econ Blog http://dolanecon.blogspot.com
Expansion Continues

 Q2 2012 was the 12th consecutive quarter
  of GDP growth
 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.
 Q2 2012 GDP was solidly above pre-
  recession peak, continuing the expansion
  that the economy entered in Q3 2011

          Posted Sept. 29, 2012 on Ed Dolan’s Econ Blog http://dolanecon.blogspot.com
Sources of US GDP Growth in Q2 2012

 Consumption contributed 1.03 percentage                  Table shows the contribution
                                                           of each sector to the 1.3% total
  points to Q2 growth                                      GDP growth in Q2 2012
 Investment contributed just .09 percentage
  points to growth. Fixed investment was
  strong but almost fully offset by negative
  inventory investment
 Government spending continued its steady
  decline, led by state and local government,
  but the rate of decrease slowed compared
  to -0.8 percentage points in Q1
 Net exports contributed 0.23 percentage
  points. Export growth was strong; imports
  also grew but not by as much

          Posted Sept. 29, 2012 on Ed Dolan’s Econ Blog http://dolanecon.blogspot.com
Growth of NGDP Slows

 Nominal GDP (NGDP) growth slowed
  sharply to 2.8% in Q2, revised down
  from the 3.3% reported in the second
  estimate
 An increasing number of economists
  focus on NGDP growth as a key policy
  target
 Long term NGDP growth of 4.5
  percent (2 percent inflation and 2.5
  percent real growth) would represent
  good performance for the US
  economy
 The slowing growth of NGDP is one of
  the reasons the Fed began a new
  program of quantitative easing in mid-
  September
           Posted Sept. 29, 2012 on Ed Dolan’s Econ Blog http://dolanecon.blogspot.com
Corporate Profits Remain Strong




 Corporate profits, both before and
  after tax, were revised upward for
  Q2 2012
 Both profit measures reached all-
  time highs in the last quarter of
  2011 and have remained above
  year-earlier levels since then




         Posted Sept. 29, 2012 on Ed Dolan’s Econ Blog http://dolanecon.blogspot.com
A Mixed Message for the Election

 The Q2 GDP data carry a mixed
  message for the presidential election:
     They reinforce the GOP argument that
      the economy as a whole remains weak
      despite Obama’s best efforts
     At the same time they reinforce the
      Democratic narrative that corporations
      and their shareholders are doing well
      while the rest of the population
      struggles
 The advance estimate of Q3 GDP will be
  released on Oct 26, just before the
  election, if anyone is still watching by
  then

          Posted Sept. 29, 2012 on Ed Dolan’s Econ Blog http://dolanecon.blogspot.com

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Latest GDP Revisions Carry Mixed Message for Elections

  • 1. Data for the Classroom from Ed Dolan’s Econ Blog http://dolanecon.blogspot.com/ Latest GDP Revision Carries Mixed Message for Election: Economy Weak but Profits Strong Posted Sept. 29, 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. Q2 Real GDP Growth Estimate Falls to 1.3 Percent  The third estimate of US real GDP growth for Q2 2012 showed output increasing at an annual rate of just 1.3%  Growth had previously been reported at 1.7% in the second estimate released at the end of August  It was the slowest growth since Q3 2011 Posted Sept. 29, 2012 on Ed Dolan’s Econ Blog http://dolanecon.blogspot.com
  • 3. Expansion Continues  Q2 2012 was the 12th consecutive quarter of GDP growth  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.  Q2 2012 GDP was solidly above pre- recession peak, continuing the expansion that the economy entered in Q3 2011 Posted Sept. 29, 2012 on Ed Dolan’s Econ Blog http://dolanecon.blogspot.com
  • 4. Sources of US GDP Growth in Q2 2012  Consumption contributed 1.03 percentage Table shows the contribution of each sector to the 1.3% total points to Q2 growth GDP growth in Q2 2012  Investment contributed just .09 percentage points to growth. Fixed investment was strong but almost fully offset by negative inventory investment  Government spending continued its steady decline, led by state and local government, but the rate of decrease slowed compared to -0.8 percentage points in Q1  Net exports contributed 0.23 percentage points. Export growth was strong; imports also grew but not by as much Posted Sept. 29, 2012 on Ed Dolan’s Econ Blog http://dolanecon.blogspot.com
  • 5. Growth of NGDP Slows  Nominal GDP (NGDP) growth slowed sharply to 2.8% in Q2, revised down from the 3.3% reported in the second estimate  An increasing number of economists focus on NGDP growth as a key policy target  Long term NGDP growth of 4.5 percent (2 percent inflation and 2.5 percent real growth) would represent good performance for the US economy  The slowing growth of NGDP is one of the reasons the Fed began a new program of quantitative easing in mid- September Posted Sept. 29, 2012 on Ed Dolan’s Econ Blog http://dolanecon.blogspot.com
  • 6. Corporate Profits Remain Strong  Corporate profits, both before and after tax, were revised upward for Q2 2012  Both profit measures reached all- time highs in the last quarter of 2011 and have remained above year-earlier levels since then Posted Sept. 29, 2012 on Ed Dolan’s Econ Blog http://dolanecon.blogspot.com
  • 7. A Mixed Message for the Election  The Q2 GDP data carry a mixed message for the presidential election:  They reinforce the GOP argument that the economy as a whole remains weak despite Obama’s best efforts  At the same time they reinforce the Democratic narrative that corporations and their shareholders are doing well while the rest of the population struggles  The advance estimate of Q3 GDP will be released on Oct 26, just before the election, if anyone is still watching by then Posted Sept. 29, 2012 on Ed Dolan’s Econ Blog http://dolanecon.blogspot.com