Saturday, August 27, 2011

Already Weak, US GDP Growth in Q2 2011 is Revised Downward

U.S. GDP growth for the second quarter of 2011 was revised downward to a 1 percent annual rate from the 1.3 percent advance estimate reported last month. The downward revision disappointed many observers. About 2.5 percent growth is generally considered necessary to keep unemployment from rising, when growth of the labor force is taken into account.

Although a recovery has been underway for two years, the level of U.S. real GDP has not yet reached its peak level of mid-2007, before the recession. When GDP finally reaches its previous peak, the economy will have been considered to make the transition from the recovery phase of the business cycle to the expansion phase.

About three-quarters of the growth of GDP was attributable to investment, mostly business fixed investment. Housing investment remained weak. Consumption grew by about 0.3 percentage points. The government sector contracted, with slight growth of federal government activity more than offset by falling state and local government purchases. Net exports barely edged up, with moderately strong export growth almost fully offset by growth of imports.

Follow this link to view or download a set of classroom-ready slides with graphical presentations of the latest GDP estimates.

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