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Friday, April 30, 2010

GDP Growth Mild in First Quarter

The GDP growth disappointed in the first quarter.

The U.S. economy grew at a slightly slower-than-expected pace in the first quarter, held back by inventories and exports, but resurgent consumer spending offered evidence of a sustainable recovery, a government report showed on Friday.

Gross domestic product expanded at a 3.2 percent pace, the Commerce Department said in its first estimate—marking three straight quarters of growth as the economy climbs out of the worst recession since the 1930s.

Analysts polled by Reuters had forecast GDP, which measures total goods and services output within U.S. borders, growing at a 3.4 percent rate in the first three months of 2010 after a 5.6 percent growth pace in the fourth quarter.

Now, a 3% growth rate is what you'd want during normal periods of economic growth. Of course, we aren't in normal periods. Imagine that your own income should be $100,000 yearly. That's what it would have been from 2003-2007. Then, starting at the end of 2008, you not only stopped making $100,000 yearly but lost money for the next year. To make up for that crater in income you'd need to make well over $200,000 for at least a year and then you can taper back off to $100,000. The quarter prior the economy did grow at nearly 6% (or $200,000) but now it's back to normal growth.

So, our economy won't recover until we see sustained growth of 6% for several quarters in a row. 3% will simply not do it.

1 comment:

AG said...

Ideally, we should also see a pick up in hiring. Compared to jobs, the Dow and GDP are just numbers on a screen.

If last year taught us anything its that companies can be profitable even as they're doing mass layoffs.