State of the Economy 3rd and 4th Quarters 2007

Introduction

            Real gross domestic product (GDP) weakened in 2007 with an increase of 2.2% on an annual basis.  This is lower than the 2.9% increase for the full year 2006.  Economic activity showed mixed results throughout 2007.  Real GDP increased only 0.6% in the first quarter but showed marked improvement in the second quarter, increasing by 3.8%.  GDP growth seemed to have stabilized during the third quarter with an increase of 4.9%, though hopes of continued robust expansion were dashed by the virtually flat performance during the fourth quarter when GDP increased by 0.6%.  The declining trend in real GDP growth has most likely been the result of further deterioration in the housing markets, a subprime mortgage crisis that has had a systemic impact throughout financial markets despite easing of monetary policy, and further elevated energy prices and the inflationary impact upon consumer prices.   Continue reading

State of the Economy 4th Quarter 2006

Introduction

            Real gross domestic product (GDP) showed some improvement in the fourth quarter of 2006 with an increase of 3.5% at an annual rate as compared to a 2.0% increase in the third quarter.  Real GDP increased by 2.5% in the second quarter and 5.6% during the first quarter of 2006.  Real GDP increased by 1.8% in the fourth quarter of 2005 and at an annual rate of 3.2% for the full year 2005 on a revised basis.  For 2006, real GDP increased at an annual rate of 3.4%.  The advance in real GDP during the fourth quarter was helped by gains in personal consumption expenditures, exports, and government spending.  The increase in real GDP during the last quarter of 2006 came despite continued weakness in the housing markets and still elevated energy prices.    Continue reading

State Of The Economy 1st Quarter 2006

Introduction

          Economic activity rebounded sharply in the first quarter of 2006 with real gross domestic product (GDP) increasing by 4.8% at an annual rate as compared to an increase of 1.7% in the fourth quarter of 2005 and an increase of 3.5% for the full year 2005.  This increase in economic activity is the highest quarterly growth rate since the third quarter of 2003 when real GDP increased at an annual rate of 7.2%. Despite continued high energy prices and further tensions stemming from geopolitical risks, economic activity in the first quarter advanced at a favorable rate due to strength in personal consumption expenditures, increased federal spending, and increases in nonresidential fixed investment.  Continue reading

State of the Economy 3rd Quarter 2006

Introduction

            After showing signs of markedly slower growth in the second quarter, economic activity decelerated to a much more subdued pace during the third quarter.  Real gross domestic product (GDP) increased at an annual rate of only 1.6% in the third quarter following an increase of 2.5% in the second quarter and 5.6% during the first quarter of 2006.  The third quarter figure is lower than the paltry increase of 1.8% in the fourth quarter of 2005.  Real GDP increased at an annual rate of 3.2% for the full year 2005 on a revised basis.  The deceleration in real GDP continued in the third quarter despite a pause in rate tightening by the Federal Reserve’s Federal Open Market Committee (FOMC) and noticeable weakness in energy prices that had been at elevated levels for over a year.  Continue reading

State of the Economy 2nd Quarter 2006

Introduction

            Economic activity finally began to exhibit additional signs of significant slowing in the second quarter after mixed signals from various economic data indicators and strong economic growth during the first quarter.  Real gross domestic product (GDP) increased at an annual rate of 2.5% in the second quarter following an increase of 5.6% at an annual rate during the first quarter of 2006.  These figures compare to an increase of 1.8% in the fourth quarter of 2005 and an increase of 3.2% for the full year 2005 on a revised basis.  The slowdown in real GDP comes at a time of continued high energy prices and further tensions stemming from geopolitical risks.  These factors likely weighed on consumers who reigned in spending during the second quarter.  In addition, economic activity was restrained due to decreases in federal spending and real residential fixed investment as well as significant slowdowns in real nonresidential fixed investment and exports of goods and services.  Continue reading

State Of The Economy 3rd Quarter 2005

Introduction

          Despite the devastating effects of Hurricanes Katrina and Rita in the Gulf states and initial signs of slowing during the first half of 2005, economic activity remained surprisingly firm in the third quarter with real gross domestic product (GDP) increasing by 3.8% during the quarter.  This favourable growth follows a 3.3% increase in GDP during the second quarter and a 3.8% increase during the first quarter of 2005.  Though economic activity increased at a lower rate in the second quarter, the third quarter appears to provide further evidence of the resilience of the U.S. economy even in light of adverse exogenous shocks stemming from natural disasters and the resulting spike in energy prices.  The 3.8% increase during the third quarter of 2005 is slightly lower than the 4.0% increase during the same period of 2004.  With the economy continuing to show signs of modest growth, albeit slower on a year-over-year basis, a number of factors may, in combination, be at work to further temper economic growth in the coming quarters.  To be sure, the economy for the remainder of 2005 is likely to experience continued growth, though at a more modest pace than in 2004, due to a number of adverse conditions that may restrain demand.  For 2006, economic activity may be negatively impacted by various developments during the second half of 2005 stemming from lingering effects from the hurricanes in the third quarter, higher energy costs, and rising interest rates. Continue reading