Sunday, July 5, 2015

An Update on GDP

So... how's the economy doing? There is a lot of debate over the current state of the U.S. economy. Here are a couple of articles discussing first quarter GDP...

1. Why You Can't Put Faith in Reports of First Quarter Economic Slumps by Justin Wolfers
2. Ouch! US Trade Deficit Means US GDP Probably Contracted In First Quarter


  1. I read the article "Why You Can't Put Faith in Reports of First Quarter Economic Slumps" from the NY Times, and I found it very intriguing. I think it is quite odd that first quarter GDP has experienced a slump for decades now and that no other economics indicators showed a first quarter slump. I am perplexed as to what could be the cause of this reoccurring, first quarter slump to GDP. I was reading through some of the comments left on the article, and I share a similar opinion with someone. This person said that maybe it has to do with the high amount of consumer spending and amount of importing goods for quarter four, which causes quarter one to slump. Overall I think this phenomenon is very interesting, and I am curious as to what the actual cause of it is.

  2. Tim Worstall's article "Ouch! US Trade Deficit Means US GDP Probably Contracted in First Quarter" definitely shocked me a bit. It seems that the US is slowly recovering but there was negative 1st quarter growth. Worstall brings up the point that we should be worried about the trade deficit continuing into the 2nd quarter. Last year, the US also had negative growth in Q1 but followed with strong growth. Hopefully our economy can follow suit and not fall into another recession like 2008. Worstall mentions that the Fed is less likely to raise interest rates because of this trade deficit in Q1. This is probably good news to most people that are paying off interest.

  3. I also read the first article about the reoccurring first quarter slumps. I first thought about the time of year the first quarter is, and January, February, and March are what I would think would be the slowest economic months. Pairing this factor with the heavy holiday shopping we consumers now are convinced by our society to do might help explain why these slumps are only showing up after the 1980s as consumerism grows. The author mentioned seasonal adjustment to correct this factor, but how often do they recalculate the adjustment? Is it possible we aren't adjusting enough to compensate? I was stumped by the fact that only GDP is affected and no other economic measurement is skewed, but the slumps seem to be systematic and I agree with Wolfers that it seems to not be random.

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