What trends in real GDP have occurred in the time period shown in the BEA release highlights document?
The US Gross Domestic Product as published by the Bureau of Economic Analysis shows a stagnant growth rate. According to the Bureau, the real GDP increased by 2.4 in 2014 and 2015 (Bureau of Economic Analysis, 2016, para. 4). However, a critical analysis of the offsetting movement shows a downturn in the real Gross Domestic Product in 2015. For instance, a decrease in Federal Government spending in 2014 caused a significant reduction in private inventory investment.
The price index increased by 0.3 in 2015, compared to 1.5 in 2014. Moreover, GDP measured from the fourth quarter of 2014 shows an increase in Gross Domestic Product by 1.8 in 2015, compared to 2.5 in the same period in 2014. The price index of Gross Domestic Purchases also shows a downturn. Gross Domestic Purchases increased by 1.2 in 2014, compared to 0.3 in 2015. Overall, the economy increased by 2.4 percent.
What time period shown in the document experienced the most significant growth?
The third quarter experienced the highest growth rate. As highlighted by the Bureau of Economic Analysis, the third quarter experienced an estimated increase in real GDP by 2.0 percent, compared to the fourth quarter of 0.7 percent (para. 3). The increase in Gross Domestic Product reflects how the United State Government expenditure, personal consumer spending and residential investments have decreased in the last three years (BBC News, 2016). The decline in GDP in the fourth quarter reflects a downturn in nonresidential fixed investment coupled with a decrease in private investment. The price index also indicates the same scenario whereby the price index increased by 1.3 percent in the third quarter, compared to 0.2 percent in the fourth quarter.
What time period shown in the document experienced the least amount of growth?
The fourth quarter in 2015 experienced the lowest growth rate. According to the Bureau of Economic Analysis, the deceleration in PCE in the fourth quarter resulted from decreased export, local government spending and nonresidential fixed investments (para.3).
Based on the data you have researched, what do you project real GDP will do during the duration of this year? Be specific in your answer
According to Alain (2016), the United States GDP is expected to recover after a sharp decline in 2015 (p.2). The decreasing oil prices have lowered the cost of production in the economy thus raising profit margin. This has been facilitated by reduced production and transportation costs. However, instead of citizens increasing their spending, they have opted to increase their cash reserve. The decreased consumer spending has caused the economy to stagnate. According to the Federal Open Market Committee, GDP will increase by an estimated 2.4 percent in 2016 (Kimberly, 2016, para. 2). However, the GDP will decline to 2.2 in 2017 and 2 percent in 2018.
What will be the primary cause that will cause your prediction in the previous question to occur? Why?
The primary reason the US GDP is declining is the slowdown in consumer spending. The decreasing oil prices have discouraged investment in the energy sector that reported 35 percent decrease in investment expenditure. Instead of an increase in consumer spending, citizens are opting to increase their cash reserves. Most of the jobs created in the economy are in low paying segments such as the food industry. According to the Bureau of Economic Analysis, the cutback in consumer spending and weakness in the oversea markets has significantly contributed toward slow growth rate (para.3).
Moreover, the slow growth in GDP will be accelerated by the global stock market turmoil coupled with the Asian economic crisis. Jorgenson, Gollop and Fraumeni (2014) noted that Low oil prices have led to losses of jobs since the costs of petroleum production in the US are higher than in the Middle East (p.42). The low oil prices have not only affected the US economy but, also other European countries such as the UK and most European countries. For instance, last year UK announced it GDP was expected to slow down from 2.9 percent to 2.2 percent in 2015. Although economists are optimistic the economy will recover in the first quarter of 2016, the low oil prices and sinking oil prices might dampen the recovery.
References
Alain, S. (2016). Goldman Sachs: 2016 looks like a dud for the economy. Web.
Jorgenson, D., Gollop, F. & Fraumeni, B. (2014). Productivity and U.S. economic growth. Amsterdam: North-Holland, pp. 34-67.
Kimberly, A. (2016). FOMC Meetings: Schedule and Statement Summaries. Web.
BBC News, (2016). US economic growth slows sharply . Web.
Bureau of Economic Analysis, (2016). National Income and Product Accounts Gross Domestic Product: Fourth Quarter and Annual 2015. Web.