Magazine article Economic Trends

Economic Activity

Magazine article Economic Trends

Economic Activity

Article excerpt

According to the U.S. Commerce Department's preliminary estimate, GDP growth in 2005:IQ was 3.5%, up from the advance estimate of 3.1%. The revision was attributed primarily to upward revisions for personal consumption expenditures, residential investment, and exports. Imports, which subtract from GDP, decreased.

Most components' contributions to the change in real GDP have remained relatively stable over the last four quarters. The only significant changes occurred in business fixed investment and changes in inventories. However, compared to 2004:IVQ, personal consumption, business fL\ed investment, and government spending combined to subtract 1.7 percentage points (pp) from GDP, which was partly of[set by increases in other components.

Although the preliminary GDP reading for 2005:IQ was lower than both 2004:IIIQ and 2004:IVQ, it was still 0.2 t3t) higher than the 30-year average. In MaB the Blue Chip forecasters downgraded their estimate of GDP growth for 2005:IIQ to 3.0% from the 3.6% predicted in April. They also lowered tbeir estimates of 2005:11IQ and 2006:IQ growth by 0.1 pp each.

Although real disposable personal income growth tends to vary more than real personal consumption expenditures, both series follow the same basic trends. Since 2001:IIIQ, the long-term trend has been an increase in year-over-year growth. Despite the 2005:IQ slowdown in income growth, both series have averaged annual growth of 3.6%, only 0.1 pp lower than the overall economy.

Real GDP and Components, 2005:IQ (a,b)
(Preliminary estimate)

                                             Annualized
                                           percent change
                           Change,
                           billions     Current        Four
                          of 2000 $     quarter      quarters

Real GDP                     94. … 
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