Real Gross Domestic Product (GDP)

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The following is excerpted from a speech given by Federal Reserve Governor Ben S. Bernanke before the Bloomberg Panel For The Outlook On The U.S. Economy in New York City on September 4, 2003. In it he enumerates and compares some of the professional forecasts for GDP growth and the unemployment rate in the next year:

"Beginning with the real side of the economy, we see substantial agreement among the private-sector forecasters about the prospects for real GDP growth and the unemployment rate through the end of 2004. All the forecasters expect output growth during the second half of this year to be strong, in the general range of 3.7 to 4.2 percent. Despite the projections of high growth rates, the private forecasters expect the unemployment rate to remain at about the current rate of 6.2 percent through the end of this year. The private-sector forecasters also see strong economic growth continuing, although generally not accelerating, in 2004. Measuring growth as 2004:Q4 over 2003:Q4, Global Insight forecasts 4.1 percent growth for real GDP in 2004, Blue Chip calls for 3.7 percent growth, Macroeconomic Advisers sees 4.0 percent growth, and the Survey of Professional Forecasters looks for 3.8 percent growth. Notably, according to the professionals, even this performance is not expected to decrease the unemployment rate by very much. Only Macroeconomic Advisers sees unemployment in the fourth quarter of 2004 falling as low as 5.4 percent; the rest foresee the unemployment rate remaining at 5.8 or 5.9 percent during the last quarter of next year. These projections for the paths of growth and unemployment are broadly consistent with forecasts made by the members of the FOMC prior to our June 24-25 meeting and released shortly thereafter as part of the Federal Reserve's semiannual Monetary Policy Report to the Congress. The FOMC members' forecasts for real GDP for 2003 were for growth over the entire year; they were not broken down by quarter. However, given information about the first half available at the time the Committee's forecasts were made, the central-tendency FOMC forecast for real GDP growth for the year as a whole almost certainly implies a noticeable pickup in the pace of expansion in the second half of 2003. For 2004, the central-tendency FOMC projection for real GDP growth as of the end of June covered the range of 3-3/4 percent to 4-3/4 percent, a forecast more optimistic than even current private-sector forecasts of growth for next year and suggestive of an acceleration in real activity from the second half of 2003 to 2004."

http://www.federalreserve.gov/boarddocs/speeches/2003/200309042/default.htm

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The following perspective is excerpted from a press release by the Bureau Of Economic Analysis that describes revised estimates for GDP growth. It was released on September 26, 2003:

Real gross domestic product -- the output of goods and services produced by labor and property located in the United States -- increased at an annual rate of 3.3 percent in the second quarter of 2003, according to revised estimates released by the Bureau of Economic Analysis. In the first quarter, real GDP increased 1.4 percent.

The GDP estimates released today are based on more complete source data than were available for the preliminary estimates issued last month. In the preliminary estimates, the increase in real GDP was 3.1 percent.

The major contributors to the increase in real GDP in the second quarter were personal consumption expenditures (PCE), federal defense spending, and nonresidential fixed investment. The contributions of these components were partly offset by a negative contribution from private inventory investment. Imports, which are a subtraction in the calculation of GDP, increased. The acceleration in real GDP growth in the second quarter primarily reflected an upturn in federal defense spending, an acceleration in PCE, and an upturn in nonresidential fixed investment that were partly offset by an upturn in imports.

Final sales of computers contributed 0.18 percentage point to the second-quarter change in real GDP after contributing 0.18 percentage point to the first-quarter change. Motor vehicle output decreased in both the first and second quarters. Motor vehicle output subtracted 0.11 percentage point from the second-quarter change in real GDP after subtracting 0.06 percentage point from the first-quarter change.

http://www.bea.doc.gov/bea/newsrel/gdpnewsrelease.htm

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The following excerpt is from a speech given by Federal Reserve Vice Chairman Roger W. Ferguson, Jr. as part of the "charter lecture" series at the University of Georgia in Athens, Georgia on February 12, 2003. In it he discusses the role of the Federal Reserve in attempting to balance the dual goals of price stability (CPI) and economic growth (GDP):

"…Inflation began to drift higher during the Vietnam War and flared into double digits following the sharp increases in oil prices in the middle and late 1970s. Although snapping the inflationary spiral was painful for our nation--the recession of the early 1980s was the deepest since the Great Depression--the subsequent prosperity in terms of income growth and economic stability has been unprecedented. The experience deepened the conviction of many economists and central bankers that economic policies that push an economy to operate beyond its long-run potential to produce inevitably lead to rising rates of inflation. Moreover, the strong economic performance of the U.S. economy following the taming of inflation has supported the view that price stability fosters economic efficiency and higher productivity. Indeed, price stability is now a formal objective included in the charters of nearly all central banks. A firm long-run focus on price stability does not mean that the central bank cannot have other economic goals, although central bankers disagree on this somewhat, at least in emphasis and priority. Many nations or economic regions, including the United Kingdom and the euro area, have adopted price stability as their primary objective. But in our case, we often summarize the multiple statutory goals of the Federal Reserve in terms of the "dual objectives" of price stability and sustainable economic growth. We see these twin objectives as fully compatible in the long run. Our experience in the United States has been that multiple objectives for policy do not undermine policy performance when the public is convinced that the central bank is committed to price stability over the long run. Indeed, the commitment to long-run price stability can afford the central bank some flexibility in employing its tools to address shorter-run economic issues. Certainly such has been the case for the United States in recent years. Since I joined the Federal Reserve in 1997, the U.S. economy has weathered a remarkable series of economic shocks--both positive and negative--and the Federal Open Market Committee (FOMC) has adjusted the stance of monetary policy over a wide range in response to those shocks."

http://www.federalreserve.gov/boarddocs/speeches/2003/20030212/default.htm