Posted by: Josh Lehner | March 2, 2012

GDP Growth, Contributions to

This post provides a quick look at the sources of growth for the U.S. economy since the expansion began. GDP reached its low point from the Great Recession in 2009q2 and has grown 6.24 percent (in real terms) over the 10 quarters since then, with data through 2011q4.

The table below shows the contribution each category has made to the total real GDP growth since 2009q2. The proper way to read the table is best explained using examples. The increases in Consumption (Personal Consumption Expenditures) have accounted for 4.13 percentage points of the 6.24 percent total increase. Or the declining Government spending has actually subtracted 0.51 percentage points of growth from the economy over the past 10 quarters (that is, real GDP would be higher today if not for the cuts at the state and local levels).

Contribution to Growth (2009q2 – 2011q4)

Gross domestic product 6.24%
Consumption (PCE) 4.13%
  Goods 2.72%
    Durable goods 1.90%
    Nondurable goods 0.81%
  Services 1.41%
Investment 3.78%
  Fixed investment 1.90%
    Nonresidential 1.90%
      Structures -0.35%
      Equipment and software 2.26%
    Residential 0.00%
  Change in private inventories 1.88%
Net Exports -0.58%
  Exports 2.82%
    Goods 2.35%
    Services 0.47%
  Imports -3.40%
    Goods -3.22%
    Services -0.18%
Government -0.51%
  Federal 0.12%
    National defense -0.03%
    Nondefense 0.15%
  State and local -0.63%
Residual -0.59%

___________________________________

Obviously increases in consumer spending and business investment have driven the recovery overall, while net exports and the public sector have been minor drags. It is important to point out that while Exports have contributed nearly 3 percentage points of growth (a good source of growth), these gains have been more than offset by increases in imports. Roughly 2/3 of this import increase can be accounted for by petroleum increases (both volume and price increases) with the other 1/3 being non-petroleum goods and services. See Calculated Risk for more on the trade deficit. The silver lining here with petroleum imports being back to pre-recession levels is that they most likely cannot subtract another 1+ percentage point of growth each year. Barring another oil shock, one would reasonably expect petroleum imports to hold roughly steady or even decline should prices fall.

It is important to keep in mind that this breakdown of growth represents a snapshot in time: How have things changed from date X to date Y. The precise components of each quarter of growth (or year) is slightly different and changing the beginning or ending dates will result in slightly different calculations. This particular exercise was chosen to examine what components have driven the overall increase in the economy since the technical recession ended.


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