Good news on GDP

Date posted: December 12, 2011

Most economists seem to cheer the latest news on the economy.  Gross domestic product, the broadest measure of the economy, rose 2.5 percent on an annual basis in the third quarter. What does this mean? Why is it important? And should we be happy? N.C. State University economist Mike Walden answers.

“Well, first of all, I should say … that this number will be revised a couple of times.  So the 2.5 percent may not be the final number, but … so far it looks like a good number.

“What this specifically means is that the value of everything that’s produced in the economy — both from manufacturers as well as service people, farmers, ranchers, government, private sector, everyone — in the third quarter went up on an annual basis … by 2.5 percent.

“Now this was much better, much better than our growth rates early on in the year.  In the first quarter, we barely grew above 0.4 percent and in the second quarter 1.3 percent.  The big concern here is if you don’t have growth — in other words if this measure actually goes in reverse; it’s less than zero — that’s a pretty good indication the economy is in recession.

“So, right now for the third quarter, we can say the economy appears not to be in a recession.  If we look behind the numbers, we see that there’s been some fairly significant improvement in terms of output in areas like machinery and technology. Also our exports have been going very well. They’ve been rising twice as fast as our imports.

“Negatives in the reports, still we’ve seen modest gains in housing, And we’ve also seen declines in the production at state and local government levels.”

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