Data for the Classroom from
Ed Dolan’s Econ Bloghttp://dolanecon.blogspot.com/ US GDP Shrinks in Q4. How to Interpret the Bad News? Posted Jan 30, 2012 Terms of Use: These slides are made available 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 Publishers.

Q4 GDP Shows Unexpected Decrease
The advance estimate of US real GDP growth for Q4 2012 decreasing at a 0.1 percent annual rate The advance estimate is subject to later revisions averaging plus or minus 1.3 percentage points If confirmed, the quarterly decrease would be the first since 2009 Posted Jan. 30, 2013 on Ed Dolan’s Econ Blog http://dolanecon.blogspot.com

Expansion Interrupted 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. Q4 2012 GDP dropped slightly from Q3 but at this point it seems more likely this is an interruption of the expansion than the start of a new recession Posted Jan. 30, 2013 on Ed Dolan’s Econ Blog http://dolanecon.blogspot.com

Sources of the Q4 Decrease
in GDP Table shows the contribution Consumption contributed a strong 1.52 of each sector to the -0.1% percentage points to Q3 growth total GDP change in Q4 2012 Investment contributed -0.08 percentage points. Fixed investment was strong but more than offset by falling nonfarm inventories Exports contributed -0.81 percentage points. If confirmed, this will be the first decrease in exports since Q1 2009. The government sector also made a negative contribution to growth; details on the next side Note: Imports are recorded in the national accounts with a negative sign, so the positive 0.11 percent shown here represents a decrease in imports Posted Jan. 30, 2013 on Ed Dolan’s Econ Blog http://dolanecon.blogspot.com

Shrinking Government The government contribution
to GDP growth has been negative throughout most of the recovery In earlier quarters, state and local governments shrank most rapidly Recently, state and local government has stabilized, but federal spending has begun to decrease The sharp increase in Q3 2012 and subsequent decrease in Q4 are largely due to unusual movements in federal defense spending Posted Jan. 30, 2013 on Ed Dolan’s Econ Blog http://dolanecon.blogspot.com

Shrinking Government The government contribution
to GDP growth has been negative throughout most of the recovery In earlier quarters, state and local governments shrank most rapidly Recently, state and local government has stabilized, but federal spending has begun to decrease The sharp increase in Q3 2012 and subsequent decrease in Q4 are largely due to unusual movements in federal defense spending Posted Jan. 30, 2013 on Ed Dolan’s Econ Blog http://dolanecon.blogspot.com