Gross Domestic Product (GDP)
Chart of the Week for November 2 - November 8, 2007
A country’s gross domestic product (GDP) measures the size of its economy. GDP is generally defined as the market value of all final goods and services produced within a country in a given period of time. Many economists follow movements in GDP growth rates to assess how quickly or slowly an economy is growing or contracting. GDP is measured with inflation (nominal) and without inflation (real).
On Wednesday of this week, the Bureau of Economic Analysis (BEA) released the preliminary estimate for third quarter 2007 GDP. The BEA reported that the real GDP grew 3.9% during the quarter on an annualized basis; which was above consensus expectations of 3.0% growth. The chart above compares the annualized real GDP growth rate per quarter since 2006. Some economists consider 3% to be the expected long-term real GDP growth rate for the U.S. economy.
Growth in the third quarter improved slightly from the 3.8% annualized pace in the second quarter. According to Moody's Economy.com, relative to the second quarter, the improvement came from stronger growth in consumer spending and exports, with imports, homebuilding and slower growth in nonresidential construction offsetting much of this. Despite strong growth in the third quarter, the Federal Reserve lowered the target federal funds rate this week by 0.25% to 4.50% of the assertion that growth may slow due to the "intensification on the housing correction."
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