GDP Growth Remains Slow in Q1 2012, Corporate Profits Fall
1. Data for the Classroom from
Ed Dolan’s Econ Blog
http://dolanecon.blogspot.com/
US GDP Grows Slowly,
Corporate Profits Fall on
Slowing World Economy
Posted June 29, 2012
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2. Q1 GDP Grows at 1.9 Percent in Q1 2012
US GDP growth slowed to 1.9% in
Q1 2012, down from 3% in Q4 2011,
according to the third estimate from
the BEA
The advance estimate released in
April had shown growth of 2.2%
It was the 11th consecutive quarter of
growth
Posted June 29, 2012 on Ed Dolan’s Econ Blog http://dolanecon.blogspot.com
3. Expansion Continues
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.
Q1 2012 GDP was solidly above pre-
recession peak, continuing the expansion
that the economy entered in Q3 2011
Posted June 29, 2012 on Ed Dolan’s Econ Blog http://dolanecon.blogspot.com
4. Sources of US GDP Growth in Q1 2012
Consumption contributed 1.74 percentage Table shows the contribution
of each sector to the 1.9% total
points to Q1 growth, slightly less than GDP growth in Q1 2012
previously estimated
Investment contributed .84 percentage
points to growth, slightly higher than
previously reported
Government spending continued its steady
decline, led by defense cuts; state and local
government spending also fell
Export growth contributed just .58
percentage points, much less than the .98
percent reported in the second estimate
released in May
Posted June 29, 2012 on Ed Dolan’s Econ Blog http://dolanecon.blogspot.com
5. Contribution of Government to GDP Continues to Shrink
Posted June 29, 2012 on Ed Dolan’s Econ Blog http://dolanecon.blogspot.com
6. Nominal GDP Gap Remains Large
Q1 nominal GDP (NGDP) growth was
3.9% (quarterly growth stated as
annual rate), about the same as in Q4
NGDP growth consisted of 2.9% real
growth and 2.0% 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 June 29, 2012 on Ed Dolan’s Econ Blog http://dolanecon.blogspot.com
7. Corporate Profits Decline on Slowing World Economy
BEA data show that corporate
profits decreased in Q1 2012 for
the first time since they hit their
cyclical low in mid-2008
A decrease in foreign profits than
offset growth of domestic profits to
bring the total down
Corporate profit tax revenue
increased sharply, widening the
gap between before and after tax
profits
Posted June 29, 2012 on Ed Dolan’s Econ Blog http://dolanecon.blogspot.com