2006 was the last year before the Great Recession where the economy grew at a healthy pace. No one thought the subprime mortgage crisis would spread beyond the housing market. However, the clues were there.
Here are the GDP statistics for each release for fourth quarter of 2006, and the final GDP quarterly growth rate for the previous quarters. (Each year, the BEA revises these figures, based on new data. I've updated this sheet with the revisions made for each year, so you can see how much these estimates change. The update made on July 29, 2013, is first, with the prior estimates' in parentheses.
2006 GDP for the Year: 2.7% (2011 estimate was 2.8%)
Q4 2006 GDP: 3.2% (Prior estimates: 2.7% in 2011, 3.0% in 2010, 1.5% in 2009)
Advance Report - The U.S. economy, as measured by GDP, grew 3.5% in the fourth quarter of 2006, according to the very first estimate from the Bureau of Economic Analysis (BEA). This compares to a worrisome growth rate of only 2% in Q3, and closer to the annual 3.2% growth rate in 2005.
The BEA credited the increase in growth to personal consumption, higher exports and higher government spending. Imports were lower, which also helped the growth rate. This can be attributed to lower oil prices, which were 12% of imports in 2005.
- Second Report - Growth was revised down to 2.2%.
- Third Report - Growth was revised up slightly to 2.5%.
Q3 2006 GDP: 0.3% (Prior estimates: .1% in 2011 and 2010)
Q2 2006 GDP: 1.3% (Prior estimates: 1.6% in 2011 and 1.4% in 2010.)
Q1 2006 GDP: 4.9% (Prior estimates: 5.1% in 2011 and 5.4% in 2010.)
2005 GDP Summary
The Bureau of Economic Analysis (BEA) reported that the driver of the US economy in 2005 was services, not manufacturing or consumer products. The services sector, which comprises 70% of the economy, grew 3.7%, and that is what drove the 3.2% GDP growth .
Half of the growth in the service sector occurred in only three sub-sectors:
- Information technology, which grew 9%;
- Professional, scientific, and technical services, which grew 6.8%;
- Retail trade, which grew 5%.
The flip side of this report is that, other than construction (3.9% growth), manufacturing slowed significantly, growing just over 2%, less than half of the nearly 5% growth the year before. This was primarily because of a decline in manufacturing of consumer products. (Source: BEA ”Growth Domestic Product by Industry: 2003-2005”, December 11, 2006)
What This Means to the U.S. Economy
This report reflects the changing nature of the U.S. comparative advantage. The U.S. is still competitive at producing services, especially finance, real estate and health care, and becoming less competitive at producing consumer products, since most of these are now imported from China. We are also still competitive in producing high-end telecommunications and IT services for businesses. The forecasts for 2007 predict continued slowing as a result of the decline in housing construction.
What Does This Mean for You?
A slowing economy means you should review your personal finances and spending habits. In addition to Christmas shopping, December is a good time to review your 2006 income, do some tax planning, and determine how well situated you are for the New Year.
More GDP by Year
For earlier years, see U.S. GDP History