Tuesday, August 2, 2011

Data for the Classroom: Weak Q2 GDP Growth, Downward Revisions

It is hard to find a good way to spin the latest US GDP data. The economy grew at an estimated 1.3% annual rate in Q2 2011. Although the January-March 2011 quarter was the 8th consecutive quarter of growth since the end of the recession that lasted from Dec 2007 to Jun 2009, the growth rate of 1.3% disappointed many observers. About 2.5% is needed to keep unemployment from rising, when increases in the labor force and productivity are taken into account.
Q1 growth was revised sharply downward to just 0.4 % from 1.8%. Revised 2008 and 2009 data show that the recession was much deeper than previously thought. After the latest revisions, it now appears US real GDP has not yet reached its pre-recession peak (Q3 2007).

Looking at the report line by line, consumption barely grew in Q2 2011. Investment grew at 0.87%, with strong business fixed investment helping to make up for weak residential investment. Federal government spending grew slightly but was more than offset by continued decline of state and local government spending. Net exports grew strongly on good export growth and slowing growth of imports.

Follow this link to view or download a classroom-ready slideshow with charts of the latest US GDP data.

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