us corporate profits plunge in q1 2014 as gdp falls 1 percent
DESCRIPTION
US real GDP fell at an annual rate of 1 percent in Q1 2014, according to the second estimate from the BEA. Corporate profits plunged, but remained high by historical levelsTRANSCRIPT
Economics for your Classroom fromEd Dolan’s Econ Blog
US Corporate Profits Take Big Hit as Q1 GDP Falls a Full
Percentage PointPosted May 29, 2014
Terms of Use: These slides are provided under Creative Commons License Attribution—Share Alike 3.0 . You are free to use these slides as a resource for your economics classes together with whatever textbook you are using. If you like the slides, you may also want to take a look at my textbook, Introduction to Economics, from BVT Publishing.
May 29, 2014 Ed Dolan’s Econ Blog
US GDP Falls in Q1 2014
The second estimate from the Bureau of Economic Analysis released on May 29 showed that US real GDP fell at an annual rate of 1.0 percent in Q1 2014
The advance estimate released in April had shown positive growth of 0.1 percent
Harsh winter weather undoubtedly contributed to the downturn
Phases of the Business Cycle
According to standard business cycle terminology, the recession phase of the business cycle is the downward movement of GDP from its previous peak
The recovery phase is the upward movement from the trough (low point) of the recession and continues until GDP again reaches its previous peak.
Once GDP moves above its previous peak, the expansion phase begins.
The latest data show that the expansion has stalled, although growth is expected to resume in the second quarter
May 29, 2014 Ed Dolan’s Econ Blog
Sources of Growth by Sector
Most of the fall in GDP was due to a decrease in investment, especially a sharp decrease in inventories
The contribution from consumption was positive but lower than the 2.22 percentage points in Q3
A decrease in expenditures of state and local government was only partly offset by an increase in Federal expenditures
Exports, which had been a strong point of the recovery, also turned negative
Contribution by sector to the -1% GDP growth in Q1 2014
Note: Imports are recorded in the national accounts with a negative sign, so the -.12 percentage points shown here represent an increase in imports
May 29, 2014 Ed Dolan’s Econ Blog
Export Growth Plunges
Exports have played a leading role in GDP growth during much of the recovery
Beginning in Q2 2012, the growth of exports slowed, but then recovered again in the last three quarters of 2013
In Q1 2014, exports took a dive, turning in by far their worst performance since the depths of the recession
May 29, 2014 Ed Dolan’s Econ Blog
State and Local Spending Turns Negative Again
Decreasing government spending, has been a negative influence on GDP growth for most of the past 3 years
In mid-2013, state and local government spending showed the first convincing growth for four years, more than offsetting the continued decrease in federal spending
In Q1 2014, the situation reversed, with S&L spending making a negative contribution that more than offset a tiny increase in federal government spending
May 29, 2014 Ed Dolan’s Econ Blog
Corporate Profits Take a Dive
For most of the past two years, corporate profits have been running at or near record-high levels
Profits before tax fell 10 percent in Q1 2014 and profits after tax plunged by 14 percent
Despite the sharp drop, corporate profits after tax remained above the peak reached during the boom that preceded the Great Recession
May 29, 2014 Ed Dolan’s Econ Blog
Click here to learn more about Ed Dolan’s Econ texts or visit www.bvtpublishing.com
For more slideshows, follow Ed Dolan’s Econ Blog
Follow @DolanEcon on Twitter