US GDP growth for Q2 2013 was revised upward to 2.5 percent, largely due to stronger exports. The deflator for personal consumption expenditures, an important inflation indicator, fell to zero.

1. Economics for your Classroom from
Ed Dolan’s Econ Blog
US GDP Growth for Q2
Revised up on Stronger Trade
Data, Inflation Falls
Posted August 31, 2013
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2. August 31, 2013 Ed Dolan’s Econ Blog
US GDP Grows at 2.5 Percent Rate in Q2 2013
 The second estimate from the
Bureau of Economic Analysis
showed US GDP growing at a 2.5
percent annual rate in the second
quarter of 2013.
 That was up from 1.7 percent in
reported earlier for the quarter, and
from 1.1 percent in Q1 2013
 Stronger exports accounted for the
largest share of the upward revision

3. Phases of the Business Cycle
 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. The
latest data show that the expansion is
gaining strength again after a slowdown
in late 2012
August 31, 2013 Ed Dolan’s Econ Blog

4. Sources of Growth by Sector
 Consumption contributed 1.21 percentage
points to Q2 growth, a little below average
for recent quarters
 Investment contributed 1.48 percentage
points. Fixed investment was much
stronger than in Q1 while inventories grew
a little slower
 Exports resumed growth after a brief
decrease in Q1 (see next slide). Imports
increased more than exports, so the
contribution of net exports was negative
 The government sector also made a
negative contribution to growth, but the
decrease was smaller than in Q1
Contribution by sector to the
2.5% GDP growth in Q2 2013
Note: Imports are recorded in the national
accounts with a negative sign, so the -1.11
percentage points shown here represent an
increase in imports
August 31, 2013 Ed Dolan’s Econ Blog

5. Exports Show Renewed Growth after a Pause
 Exports played a leading role in GDP
growth during the early part of the
recovery
 Beginning in Q2 2012, weakness in
many US trading partners slowed the
growth of exports
 The latest data for Q2 show renewed
strength in the export sector, in defiance
of global trends
August 31, 2013 Ed Dolan’s Econ Blog

6. Inflation Indicators Fall Sharply
 In addition to data on GDP and its
components, the national income
accounts include a number of inflation
indicators
 The broadest is the GDP deflator,
which reflects changes in the prices of
all GDP components
 Another is the deflator for personal
consumption expenditure, an
alternative to the more widely
publicized consumer price index. The
Fed pays particular importance to the
PCE deflator
 Both of these inflation indicators fell
sharply in Q2
August 31, 2013 Ed Dolan’s Econ Blog

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