US real GDP grew at 1.5% in Q2 2012 and nominal GDP growth slowed to 3.1 percent. Slow GDP growth puts additional pressure on the Fed to adopt a more expansionary policy stance

1. Data for the Classroom from
Ed Dolan’s Econ Blog
http://dolanecon.blogspot.com/
US GDP Grow Slows in Q2
Putting New Pressure on
the Fed
Posted July 28, 2012
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2. Q2 Real GDP Growth Slows to 1.5 Percent
 US real GDP growth slowed to 1.5%
in Q2 2012, down from 2% in Q1,
according to the advance estimate
from the BEA
 Revisions to earlier numbers raised
the growth estimates for Q4 2011
and Q1 2012
 The advance estimate is based on
partial data and is subject to an
average revision (disregarding sign)
of 0.6 percentage points
Posted July 28, 2012 on Ed Dolan’s Econ Blog http://dolanecon.blogspot.com

3. Expansion Continues
 Q2 2012 was the 12th consecutive quarter
of GDP growth
 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.
 Q2 2012 GDP was solidly above pre-
recession peak, continuing the expansion
that the economy entered in Q3 2011
Posted July 28, 2012 on Ed Dolan’s Econ Blog http://dolanecon.blogspot.com

4. Sources of US GDP Growth in Q2 2012
 Consumption contributed 1.05 percentage Table shows the contribution
points to Q2 growth, down sharply from Q1 of each sector to the 1.5% total
GDP growth in Q2 2012
 Investment contributed 1.08 percentage
points to growth, slightly higher than in Q1,
due to an increase in inventories
 Government spending continued its steady
decline, led by state and local government,
but the rate of decrease slowed compared
to -0.8 percentage points in Q1
 Export growth contributed .73 percentage
points, up from Q1, but imports (a negative
number in the accounts) increased even
more strongly so net exports were also
negative
Posted July 28, 2012 on Ed Dolan’s Econ Blog http://dolanecon.blogspot.com

5. Growth of NGDP Slows
 Q1 nominal GDP (NGDP) growth
slowed sharply to 3.1 percent in Q2
from 4.2 percent in Q1
 An increasing number of
economists focus on NGDP growth
as a key policy target
 Long term NGDP growth of 4.5
percent (2 percent inflation and 2.5
percent real growth) would
represent good performance for the
US economy
 The slowing growth of NGDP puts
additional pressure on the Fed for
more expansionary policy
Posted July 28, 2012 on Ed Dolan’s Econ Blog http://dolanecon.blogspot.com