Nov 29, 2016
Despite Strong Quarterly Growth, Economy Continues to Struggle
Post by Derek Yale
Today, the U.S. Department of Commerce released its second estimate of gross domestic product (GDP) for the third quarter of 2016, announcing that the U.S. economy expanded at an annualized rate of 3.2 percent, up from 1.4 percent during the second quarter, and up from 0.8 percent in the first quarter.
Despite the uptick, average quarterly growth for this year still stands at only 1.7 percent. Further, this slow pace still means most families aren’t feeling any meaningful improvements.
The American economy continues to struggle, seven years into a “recovery” that’s hardly deserving of the name.
Barring an unlikely burst of growth in Obama’s final weeks in office, he will have presided over slower annual growth than any president since Eisenhower.
Here are the facts:
2016 Average Quarterly Growth: The economy has grown at an average quarterly rate of 1.8 percent during the first three quarters of 2016, 0.4 percentage points slower than the same period last year and 0.8 percentage points slower than the same period in 2014. This is the slowest average growth for the first nine months of the year since 2012 – when the economy grew at an average quarterly rate of 1.1 percent.
Annual Growth Under President Obama: During the eight years under President Obama, annual growth has averaged a sluggish 1.6 percent. This includes the third quarter annualized growth rate for 2016 of 3.2 percent. Annual growth under President Obama has been the slowest of any administration since President Eisenhower.
Post-Recession Growth Rate: From 2010 to 2016, the economy averaged a mere 2.1 percent quarterly growth rate. This is significantly lower than the 3.5 percent average rate of growth in the same timespan after the last three recessions and the weakest expansion since 1949.
Pre-Recession Growth Rate: From 1946 to 2007, the U.S. economy expanded at an average quarterly rate of 3.5 percent, significantly higher than the growth rate observed during the current post-recession expansion and 0.3 percentage points higher than the growth rate observed during the third quarter of 2016.
Falling Private Investment: Private fixed investment, which incorporates business and residential spending, fell by 0.9 percent during the third quarter of 2016. This is up from the 1.1 percent contraction observed during the second quarter. Spending on business equipment contributed to this contraction, falling at 4.8 percent. Further, residential spending contracted by 4.4 percent.
Consumer Spending Growth: Consumer spending, which accounts for roughly 70 percent of U.S. economic activity, grew at an annual rate of 2.8 percent during the during the third quarter of 2016. Overall, consumer spending is down 1.5 percentage points from the increase observed during the second quarter of 2016.