U.S. Gross Domestic Product
Fourth Quarter GDP Remains Positive at 0.6%
March 27, 2008
Real gross domestic product increases for the fourth consecutive quarter in 2007; the 25th consecutive quarter of growth. The U.S. economy has not receded since the third quarter of 2001.
Don't tell the banking industry and most of those on Wall Street, but the United States economy is still growing albeit at the slowest pace since the first quarter of 2007, according to the finalized figures released earlier this morning from the U.S. Commerce Department.
Fourth quarter real gross domestic product -- the total market value of all final goods and services adjusted for inflation -- increased at an annual rate of 0.6 percent, according to final estimates released by the Bureau of Economic Analysis, as stated in the Commerce Department's quarterly final GDP press release. The final figure matches the preliminary figure released on February 28th.
Personal consumption, exports, nonresidential structures, state and local government spending, and equipment and software were the primary contributors to growth. Private inventory investment and residential fixed investment (housing) were the primary negative contributors.
Largely lost in the current worries over the health of the largest U.S. banks and the turmoil in the credit markets is the fact that GDP has now grown for the 25th consecutive quarter. Not since third quarter of 2001 when GDP declined by -1.4% has the U.S. experienced negative growth.
Generally, a recession is defined as "a decline in real output that persists for more than two consecutive quarters of a year," according to Macroeconomics, seventh edition by David C. Colander, a noted economist. However, other economists consider any sizable drop in GDP to be the sign of recessionary activity. Even Colander acknowledges in his book that a downturn in economic activity from a peak in economic growth can be considered a recession.
But, at the end of the day, growth is still growth.
The volitility of the U.S. economy the past three years will make pinpointing a recession more challenging. Some economists are claiming we are in one now. Yet, a similar drop in GDP growth occurred at the end of 2005 (see chart above) when GDP growth dropped 3.3% from the third quarter to the fourth quarter of 2005 only to see it burst again in the first quarter the following year.
