South-Western College Publishing - Economics  

GDP Continues to Point Up
Subject Gross Domestic Product, Productivity
Topic Productivity and Growth; Output, Income, and Price Level
Key Words GDP, Commerce Department, Consumer Expenditures, Business Investment, Exports, Inflation, Productivity
News Story The Commerce Department recorded that Gross Domestic Product (GDP) increased at a 3.5% annual rate for the third quarter of 1997. The third quarter rate was higher than the 3.3% increase reported for the second quarter. Leading the increase was a significant rise in consumer expenditures 5.7% compared with a .9% increase in the second quarter. Business investment also contributed to the increase with investment in equipment growing at a 22.1% annual rate. Growth in exports was also strong.

Inflation, as measured by the GDP price index, grew at a scant 1.4% annual rate. Productivity was another good news item. Productivity gains for the third quarter are estimated to be 2%. This follows a 2.7% annualized increase in the second quarter. Two consecutive quarters of productivity increases of this magnitude have been rare in recent years.

Forecasts for fourth quarter growth in GDP are more of the same. Troublesome spots are instability in Asia and the trade sector. (Updated January 15, 1998)

Questions
  • What is GDP? How is it measured?
  • What is the GDP price index? How does it differ from the Consumer Price Index (CPI)?
  • What is productivity? What are the long-term trends in labor productivity?
Source John Simons, "GDP Grew at an Annual Rate of 3.5% in 3rd Quarter, With Little Inflation," The Wall Street Journal, November 3, 1997

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