The Bureau of Economic Analysis reported this morning that the Gross Domestic Product (GDP) grew at an annualized rate of 2.0%. Most analyst predictions were for a growth rate of 1.8%, so the latest report is good news in that sense. Even with US GDP growing at 2%, the numbers still fall short of the 3% annualized growth that is needed for a healthy recover.
While the 2% is quite a bit less than what is needed for a rapid recovery, it is still good news. The finalized numbers for the second quarter show that the economy grew a mere 1.3%. So while the growth is not as rapid as it should be for a quicker recovery, the growth is increasing and gaining momentum. As long as employers keep hiring, houses keep selling, and people keep spending, the growth rate should continue to increase.
Sales of domestic product are also up in the third quarter as compared to the second. The second quarter saw a mere 1.7% increase in sales, whereas that number has grown to 2.1% for the third quarter. It is important to remember that the numbers for the third quarter are preliminary and will be revised more than once before the end of the year.
The GDP price index, which is similar to the consumer price index, saw an increase for 1.5% for the third quarter. This is more than double the .7% that was seen in the second quarter. While this measure of inflation is still relatively low, the drastic increase does not look good for those monitoring the situation. Even when food and energy are excluded the increase is still 1.3%.
The GDP is a measure of all the goods produced by a country. It is a measure of the market value of the country. When a country is in good shape, producing more goods than they are importing, the GDP grows. However, during economic slumps, the GDP is flat or negative. During a recovery the GDP should grow at a faster pace than 3% in order to get production back up to a healthy level. With US GDP growing at 2%, the country’s economy is expanding slower than it should be even during moderate economic growth periods.