Q3 GDP Growth = 2.8%

The government reported that the economy grew by 2.8% in the third quarter. That was better than expectations of 2%. Unfortunately, much of the increase was driven by inventory restocking.

While this was the third quarter in a row of rising growth, it was also the 20th time in the last 25 quarters that GDP growth failed to crack 3%. What makes this interesting is that 3% growth was about the average growth rate for 40 years for the U.S. economy.

Below is a chart I made and I think it shows you just how poorly the economy has performed. I took real GDP and divided it by a 3% trendline. I used $4.2 trillion in Q1 of 1966 as my base.

image1364

Whenever the blue line rises, that means the economy is growing faster than 3%. A falling line indicates slower than 3%. We tracked 3% pretty well for a long time. But lately, the economy has nose-dived. We’re currently at 92.3% of the trend.

I don’t see us reverting to the mean. This may be the new normal.

Posted by on November 7th, 2013 at 10:42 am


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