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Friday, April 26, 2013

'GDP Report Has Good News and Bad News'

Justin Wolfers characterizes today's GDP report:

Gross Domestic Product Report Has Good News and Bad News: This morning's gross domestic product (GDP) report showed that the economic recovery continued through the first quarter of this year, growing at 2.5%. That's a reasonable (though not great) rate of growth, although a bit below expectations, which were for something closer to 3%. There's good news and bad news buried in the detail. The good is that consumers seem interested in spending again. We'll see whether that holds up over coming months. The bad is that firms aren't so optimistic, and investment was lackluster.
Government spending continues to detract from economic growth, as it has for 10 of the past 11 quarters. This report also provides the latest reading on the core PCE deflator, which is the rate of inflation targeted by the Fed. This measure shows inflation running at 1.2%, well below the Fed's target. Let's not get lost in the detail. This GDP report provides a soon-to-be-revised and noisy indicator of what happened in the economy a few months back. The bigger picture is that we have a fledgling recovery which needs help, but isn't getting it: Fiscal policy is set as a drag on growth, and monetary policy delivering below-target inflation.

See also Calculated Risk (more), Ryan Avent, and Catherine Rampell.

    Posted by on Friday, April 26, 2013 at 11:38 AM in Economics | Permalink  Comments (26)


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