Gross Domestic Product is a measure of the nation’s economic activity. The statistic measures the sum of the nation’s production for both the private and public sectors. A nation with an increasing GDP in real terms is considered to be growing, while one with a declining GDP in real terms is in recession. (NOTE: By “real” economists mean adjusted for inflation and population and to be in recession GDP has to decline for at least 2 consecutive quarters).
According to the BEA in its first estimate of 2nd quarter GDP growth, the output of goods and services produced by labor and property located in the United States increased at an annual rate of 1.7 percent in the second quarter of 2013, while first quarter growth was revised downward to just 1.1 percent. According to the BEA, the acceleration in real GDP in the second quarter primarily reflected upturns in nonresidential fixed investment and in exports, both of which are good signs for continued recovery. Looking deeper into the data, investment spending accounted for 1.34 percentage points of the net 1.7 percent increase in GDP, a positive sign, and the highest net contribution for investment spending since the first quarter of 2012. In addition, government consumption and transfer payments have been falling as a percentage of GDP for three quarters, also a positive sign. This is offset somewhat by significantly increasing imports (imports are subtracted from net GDP), which accounted for a loss of 1.51 percentage points of the net 1.7 percent increase.
Sectors that are reported to have grown substantially in the 2nd quarter include: Clothing, appliances, and investment in non-residential construction, as well as computer equipment. The rapid increase in automobile production tapered off in the 2nd quarter as did the purchase of restaurant meals and beverages, which was down for the first time since 2011.
In dollar terms, when adjusted for inflation, the economy grew by only $64.8 billion over the 2nd quarter, which means on a population adjusted basis, real GDP per person was up by only $206. Taking that over the year would mean that the average American would see their output rise by only about $800 in the course of the year. This means that there is only $800 per person more that can be used for wage increases, increased profits, increased rents or increased taxes. This slow growth in the economy is why growth in jobs, wages, money to pay pensions, etc, are all scarce.
With nothing on the horizon to boost economic growth, it is unlikely that we will see much growth in either profits or wages this year, all of which will continue to put a damper on demand and new business opportunities.