Real GDP and our Economy

"Tracking the pulse of the economy"

http://www.usatoday.com/money/economy/economic-outlook.htm

Real GDP is defined as the quantity of goods and services produced in a nation during a year. Real GDP takes nominal GDP and corrects for price increases. Real GDP is calculated by tracking the volume or quantity of production after removing the influence of changing prices or inflation. This article from usatoday.com is talking about the real GDP of the United States and its predicted growth over the immediate future. The USA TODAY/IHS Global Insight Economic Outlook Index believes that the United States real GDP will grow at an annualized rate of 3.7% to 3.8% during the summer months. The USA TODAY/IHS Global Insight Economic Outlook Index is predicting that this growth rate will be driven by gains in manufacturing, capital spending, and exports.

To derive this GDP growth forecast, IHS Global Insight uses eleven leading economic and key financial indicators. The eleven indicators include: the real federal funds rate, interest rate yield curve, corporate bond spread, hours worked, building permits, non-defense capital goods orders, the money supply, stock prices, ISM export orders, crude oil prices, and light vehicle sales. Some of the indicators used were positive in February including hours worked and the yield curve. Further, consumer spending and employment are also expected to show continued improvement. However, several indicators were negative last month, such as seasonally adjusted crude oil prices, declines in building permits, real capital good-orders, and light-vehicle sales.

Based on what we have learned in class and from the graph provided in the article, the predicted small and slow growth rate over the summer for real GDP seems to go right along with what has been occurring over the last six months. While we are not having a huge boost, we are slowly getting better and increasing the quantity of goods and services produced which if it continues to increase will only make are country economically stronger with a stronger dollar value. Hopefully, the quantity of goods and services being produced will continue to increase because if GDP starts to decline again, this could cause us to experience more prolonged high unemployment and not allow us to get out of these critical times. Getting a higher percentage of people back to work will boost consumer confidence and spending. With approximately 70% of the US GDP based on consumer spending, getting unemployment down to the pre-recession levels of 4-5% is key to a full economic recovery.