Magazine article Economic Trends

Economic Activity

Magazine article Economic Trends

Economic Activity

Article excerpt

Real gross domestic product (GDP) grew at an annual rate of 6.1% in 2002:IQ, the fastest pace since 1999:IVQ. Consumer spending combined with an extraordinary housing market to boost output growth: Consumption increased 3.3% from 2001:IVQ, while residential investment rose nearly 15%. Strong government spending also contributed. Although business fixed investment declined for the fifth consecutive quarter, its 6.2% decrease in 2002:IQ was an improvement over the previous four quarters. Both export and import spending increased for the first time since 1999:IIIQ; however, the increase in import spending presented the greatest drag on the economy.

The strongest contributor to real GDP in 2002:IQ was the slowdown in inventory liquidation. Changes in inventories represented 3.4 percentage points of the quarter's real GDP growth. Including the most recent correction, inventories have declined for 15 consecutive months, and the ratio of inventory to sales for all businesses reached a record low of 1.35 in April. Since the beginning of 2002, wholesalers have experienced a greater decline in their inventory-to-sales ratios than either retailers or manufacturers.

The final estimate of real GDP growth for 2002:IQ came in higher than the advance and preliminary estimates. However, Blue Chip forecasters expect real GDP growth to weaken by more than 3% in 2002:IIQ and to surpass its long-term average in 2002:IIIQ

Gross state product (GSP) represents the value of goods and services produced within a state's borders. Per capita GSP represents the value of goods and services produced per state resident. Generally speaking, per capita GSP can be used to measure the income or well-being of a state's residents, For some states, however, this measure may be significantly distorted. For example, a state that has a large city near its border may attract sizable numbers of workers from neighboring states. This distortion is particularly pronounced for the District of Columbia, whose per capita GSP was $94,026 in 2000, more than double Connecticut's. The District draws many of its workers from Maryland and Virginia, so its per capita GSP is overstated and that of its neighbors is understated.

Comparing per capita GSP for various states over different periods reveals some interesting facts. In 2000, when U.S. GDP per capita was $33,015 (up 24. …

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