Profile of the Economy by ProQuest


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                                             Profile of the Economy
                                          [Source: Office of Macroeconomic Analysis]
                                                   As of November 12, 2009

                                                                    Growth of Real GDP
    Economic activity picked up substantially in the third             (Quarterly percent change at annual rate)
quarter of 2009, after the pace of economic contraction
slowed noticeably in the second quarter. Although the                8.0
economy has stabilized and there are clear signs of recovery         6.0                 4.8            4.8 4.8
in some sectors, improvements to date are modest compared                        3.8                                                         3.5
to the declines during the recession. As of November 2009,           4.0   3.0 2.6         2.7                               2.8
the recession has lasted 2 years, using the December 2007            2.0           1.3           1.5
business cycle peak chosen by the National Bureau of                                                   0.1
Economic Research (NBER). The recession became the                   0.0
longest in the post-war period as of April, 2009.                                                              -0.2         -0.5
                                                                    -2.0                                                                 -0.7
    Headline consumer prices were down on 12-month basis
in 7 of the 9 months through September, reflecting the              -4.0
substantial decline in oil and commodity prices from peak
levels reached in summer 2008. Core inflation (a measure            -6.0                                                       -5.4
excluding food and energy prices) has remained contained for                                                                          -6.4
the past several months, and fell to the lower end of recent                    2005           2006          2007      2008           2009
ranges in September. Conditions in housing and financial
markets have continued to improve from the start made earlier
this year. Stock market indexes have trended notably higher            In 2008, consumer spending-which accounts for about 70
since early March while Treasury bond yields have remained         percent of GDP–registered its largest four-quarter drop since
fairly steady. Most economists predict continued growth in the     1974, falling by 1.8 percent. After rising by 0.6 percent in
fourth quarter of 2009, and moderate growth through 2010.          the first quarter of 2009, and declining by 0.9 percent in the
The economy has been supported by a wide variety of                second, consumer spending rose by 3.4 percent in the third
measures implemented under the American Recovery and               quarter, adding 2.4 percentage points to real GDP growth.
Reinvestment Act of 2009 (ARRA, or the “Recovery Act”), as             Residential investment–mostly residential homebuilding–
well as efforts to restore financial stability and improve         now accounts for only about 3-1/2 percent of GDP after
conditions in housing markets.                                     declining sharply since early 2006. After plunging 38
Growth                                                             percent in the first quarter of 2009, residential investment
                                                                   fell by a somewhat more moderate 23 percent in the second
     The U.S. economy experienced its first four-quarter           quarter. Residential investment then surged by more than 23
contraction since 1991 during the four quarters of 2008, as        percent in the third quarter. A number of monthly housing
real gross domestic product (GDP) fell by 1.9 percent.             measures have shown marked improvement. Single-family
Although the contraction intensified in the last quarter of 2008   housing starts rose 3.9 percent in September, continuing an
and the first quarter of 2009—the fourth quarter decline in real   upward trend begun in March. Sales of existing single
GDP of 6.4 percent was the largest quarterly contraction since     family homes surged 9.4 percent in September and are now
1982–the pace of contraction slowed dramatically in the            24 percent above January’s record lows, even as they remain
second quarter, with a contraction of 0.7 percent, the smallest    23 percent below their late 2005 peak. After 5 months of
in a year. Real GDP rose 3.5 percent in the third quarter, the     uninterr
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