4.6 percent GDP growth, based in part on strong export performance, brought the US economy close to the Fed's targets for inflation and unemployment

1. Economics for your Classroom from
Ed Dolan’s Econ Blog
As Exports Soar, US Economy
Closes In on Fed’s Targets
Posted September 26, 2014
Terms of Use: These slides are provided under Creative Commons License Attribution—Share Alike 3.0 . You are free
to use these slides as a resource for your economics classes together with whatever textbook you are using. If you like
the slides, you may also want to take a look at my textbook, Introduction to Economics, from BVT Publishing.

2. September 26, 2014 Ed Dolan’s Econ Blog
US GDP Growth in Q2 2014 Strongest in Four Years
 The third estimate from the Bureau
of Economic Analysis released on
September 26 showed that US real
GDP grew at an annual rate of 4.6
percent in Q2 2014
 That is even faster than the 4.2
percent previously reported, and is
the best performance in four years

3. Phases of the Business Cycle
 According to standard terminology, the
recession phase of the business cycle
is the downward movement of GDP
from its previous peak
 It is common to refer to the first phase of
growth following the trough (low point)
of the recession as a recovery. During
that phase, idle equipment goes back
on line and workers return to their jobs.
 Official reports call the entire growth
phase of the cycle an expansion, but
many writers apply that term only after
GDP has reached its previous peak.
 The latest data show that the expansion
resumed in Q2 2014 after a winter
downturn
September 26, 2014 Ed Dolan’s Econ Blog

4. Sources of Growth by Sector
 The renewed growth of GDP in Q2 2014
was broadly based
 Consumption grew at a slightly faster than
average pace
 Investment enjoyed one of its strongest
quarters in years
 An increase in expenditures of state and
local government more than offset a slight
decrease in Federal expenditures
 Exports, which have been a strong point of
the recovery, grew even more rapidly than
previously reported
Contribution by sector to the
4.6% GDP growth in Q2 2014
Note: Imports are recorded in the national
accounts with a negative sign, so the -.1.77
percentage points shown here represent an
increase in imports
September 26, 2014 Ed Dolan’s Econ Blog

5. Exports Show Best Growth in Four Years
 Exports have been a strong point in the
US economy throughout most of the
recovery
 Exports dropped sharply in the winter,
due in part to unusually bad weather
 They recovered in Q2, showing their
strongest growth in two years, all the
more remarkable in view of the weak
economies of several US trading
partners
September 26, 2014 Ed Dolan’s Econ Blog

6. US Economy Closes in on Fed’s Targets
 The price index for personal
consumption expenditures grew
at a 2.3 percent annual pace in
Q2
 The Fed defines its policy targets
as 2 percent inflation measured
by the PCE deflator and 5.25 to
5.75 percent unemployment
 Both of those indicators fell within
of plus or minus one percentage
point of the targets as of midyear
September 26, 2014 Ed Dolan’s Econ Blog

7. Click here to learn more about Ed Dolan’s Econ texts
or visit www.bvtpublishing.com
For more slideshows, follow Ed Dolan’s Econ Blog
Follow @DolanEcon on Twitter