The third estimate of US GDP showed real GDP growing at a respectable 3.1 annual rate. Nominal GDP grew at 5.9 percent, its fastest since the end of the recession.

1. Data for the Classroom from
Ed Dolan’s Econ Blog
http://dolanecon.blogspot.com/
Latest Revisions Show
Stronger Growth of Both
Real and Nominal GDP
Posted Dec. 29, 2012
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2. Q3 Real GDP Revised Upward to 3.1 Percent
 The third estimate of US real GDP
growth for Q3 2012 showed real
output increasing at an annual rate
of 3.1%, more than double the 1.3
percent of Q2.
 Q3 growth had previously been
reported at 2.0 percent in October’s
advance estimate, which was then
revised upward to 2.7 percent in
November’s second estimate.
Posted Dec. 29, 2012 on Ed Dolan’s Econ Blog http://dolanecon.blogspot.com

3. Expansion Continues
 Q3 2012 was the 13th 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.
 Q3 2012 GDP was about 2.4 percent
above its pre-recession peak
Posted Dec. 29, 2012 on Ed Dolan’s Econ Blog http://dolanecon.blogspot.com

4. Sources of US GDP Growth in Q3 2012
 Consumption contributed 1.12 percentage Table shows the contribution
points to Q3 growth of each sector to the 3.1% total
GDP growth in Q3 2012
 Investment contributed just .12 percentage
points to growth. Fixed investment was
weak and almost fully offset by a drought-
driven decrease in farm inventories
 Much of the upward revision came from net
exports, which contributed .38 percentage
points. The advance estimate had shown a
small decrease.
 Government spending reversed a string of
decreases, fueled largely by a jump in
defense spending, although that will Note: Imports are recorded in the national
accounts with a negative sign, so the positive
probably not be sustained 0.11 percent shown here represents a
decrease in imports
Posted Dec. 29, 2012 on Ed Dolan’s Econ Blog http://dolanecon.blogspot.com

5. Nominal GDP Growth Accelerates
 An increasing number of economists focus
on Nominal GDP (NGDP) growth as a key
policy target
 During the recession, NGDP fell far below
its potential level, opening up a wide
NGDP gap (actual minus potential)
 According to revised data, NGDP grew at
a respectable 5.9 percent in Q3 2012, the
strongest since the recovery began
 The Congressional Budget office
estimates that potential NGDP is now
growing at about 3.5 percent, below its
long-run trend of about 4.5 percent
Posted Dec. 29, 2012 on Ed Dolan’s Econ Blog http://dolanecon.blogspot.com

6. The NGDP Gap Appears to be Closing
 From the end of the recession in mid-
2009 to Q4 2010, the NGDP gap closed
significantly
 Progress toward closing the gap then
stalled. In Q2 2012 the gap was almost
the same as in Q4 2010
 Now the gap may be starting to close
again, although it will take more quarters
of data to be sure this is not just a
statistical blip
Posted Dec. 29, 2012 on Ed Dolan’s Econ Blog http://dolanecon.blogspot.com