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U.S. GDP Growth

Current, Forecast and Comparison to Business Cycle

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U.S. GDP Growth Rates

The U.S. experienced extremely negative GDP growth rates during The Great Depression.

Photo: Dorothea Lange/Library of Congress, Prints & Photographs Division, FSA-OWI Collection

The U.S. GDP growth rate is the percent change in the Gross Domestic Product (GDP) from one quarter to the next. It is the most closely watched indicator because it measures the nation's economic growth.

GDP includes all goods and services produced in the U.S., regardless of whether its made by a U.S. citizen or company, or a foreigner. If it's made within the U.S. borders, it's counted as U.S. production. GDP does not include goods and services produced by U.S. citizens or companies if they are overseas. Therefore, a Toyota truck made in the U.S. would be counted, whereas a GM truck made in Canada would not.

The U.S. Bureau of Economic Analysis (BEA) provides the U.S. growth rate for each quarter. It provides three estimates based on survey data. It's the best statistic to compare U.S. output year-over-year.

U.S. Real GDP Growth

To report GDP, the BEA uses the sales value of the goods and services produced. However, prices can increase, resulting in inflation. To make sure GDP growth excludes inflation, the BEA takes out the impact of price changes. This is called real GDP.

Current U.S. GDP Growth

The U.S. GDP growth rate for 2012 was 2.8%. That's a moderate growth rate, on the higher end of the ideal GDP growth rate of between 2 - 3%. Many people complain that it's not fast enough. That's because there are so many people who are still unemployed, and growth needs to be at least 3% to create the jobs they need. For updated quarterly reports, read Current GDP Statistics.

However, you don't really want growth to be too fast, because it will create a bubble, which then leads to another downturn. If you look at U.S. GDP growth history, you'll see how this works. The GDP growth rate will tell you which phase of the business cycle we are in. The four phases are:

  1. Peak - GDP growth is the fastest. Asset bubble.
  2. Contraction - GDP growth starts to slow.
  3. Trough - GDP growth is negative, signalling recession.
  4. Expansion - GDP growth is positive, and grows larger.

U.S. GDP Growth Forecast

The U.S. economy will continue to grow slowly, as it faces several headwinds. First is Washington's attempt to reduce government spending, itself a component of GDP. Second, high structural unemployment means older workers will not resume pre-recession levels of spending. These personal consumption expenditures are about 70% of GDP.

Forecasters are also concerned about the possibility that the Federal Reserve will need to cut back on its program of quantitative easing. This will result in higher interest rates, making loans and mortgages more expensive, and slowing GDP growth. However, that will only happen if the core inflation rate is above the Federal Reserve's 2% target inflation rate or unemployment fell below 6.5%.

Fortunately, U.S. GDP growth is boosted by exports to growing emerging market countries. In addition, the housing market is finally recovering all across the country. Home prices are rising steadily, making homeowners feel wealthier and optimistic. Last but not least, businesses continue to increase profitability by investing excess cash, which by some estimates is as much as $1 trillion.

For the most recent GDP growth forecasts by year, see U.S. Economic Outlook

GDP Growth History

The table below compares annual growth with the unemployment rate (as of December of that year), the rate of inflation (percent change year-over-year) and the phase of the business cycle. In addition, efforts to stimulate the economy or ward off inflation are noted, whether by the Federal Reserve or by elected officials. Article updated January 13, 2014

Resources for Table

U.S. Annual GDP Growth Compared to Business Cycle Phases

Year U.S. GDP Growth Unemployment Rate (December) Inflation (December Year-over-Year) Business Cycle Phase
1929 NA 3.2% .6% Economic expansion of the Roaring Twenties peaked in August. Stock market crash in October kicked off Great Depression.
1930 -8.5% 8.7% -6.4% Contraction.
1931 -6.4% 15.9% -9.3% Contraction.
1932 -12.9% 23.6% -10.3% Contraction.
1933 -1.3% 24.9% .8% Contraction ended in March trough. Expansion began with New Deal.
1934 10.8% 21.7% 1.5% Expansion.
1935 8.9% 20.1% 3% Expansion.
1936 12.9% 16.9% 1.4% Expansion.
1937 5.1% 14.3% 2.9% Expansion peaked in May. Economy started contracting, reigniting Depression.
1938 -3.3% 19% -2.8% Contraction until June trough. Expansion began.
1939 8.0% 17.2% 0% Expansion. Dust Bowl drought ended.
1940 8.8% 14.6% .7% Expansion.
1941 17.7% 9.9% 9.9% Expansion. U.S. entered WWII.
1942 18.9% 4.7% 9% Expansion.
1943 17.0% 1.9% 3% Expansion.
1944 8.0% 1.2% 2.3% Expansion.Bretton-Woods Agreement. Dollar became global currency.
1945 -1.0% 1.9% 2.2% Expansion ended in February peak. Truman became President in April when FDR passed. Dropped atomic bomb in August, ending WWII. Economy contracted until October trough.
1946 -11.6% 3.9% 18.1% Expansion cycle began, despite a huge cutback in government spending, which lowered GDP growth for the year.
1947 -1.1% 3.9% 8.8% Expansion continued in business sector, even though Federal government continued cutting back. Marshall Plan and Truman Doctrine. Cold War began.
1948 4.1% 4% 3% Expansion peaked in November. Contraction began.
1949 -0.5% 6.6% -2.1% Contraction until trough in October. Fair Deal. NATO established. Communists took over China.
1950 8.7% 4.3% 5.9% Expansion. Korean War began.
1951 8.1% 3.1% 6% Expansion.
1952 4.1% 2.7% .8% Expansion.
1953 4.7% 4.5% .7% Expansion until July peak. Contraction began. Eisenhower became President. Korean War ended.
1954 -0.6% 5% -.7% Contraction until May trough. The Dow finally returned to its pre-Depression level.
1955 7.1% 4.2% .4% Expansion.
1956 2.1% 4.2% 3% Expansion.
1957 .12% 5.2% 2.9% Expansion until August peak.
1958 -0.7% 6.2% 1.8% Economy contracted until April trough. Expansion began.
1959 6.9% 5.3% 1.7% Expansion. Fed raised rate to 4%.
1960 2.6% 6.6% 1.4% Expansion ended with April peak. Fed lowered rate to 1.98%.
1961 2.6% 6% .7% JFK became President. Contraction until February trough. Bay of Pigs invasion in April.
1962 6.1% 5.5% 1.3% Expansion. Cuban Missile Crisis.
1963 4.4% 5.5% 1.6% Expansion. LBJ became President when JFK assassinated. Fed raised rate to 3.5%.
1964 5.8% 5% 1% Expansion. Fed raised rate to 3.85%.
1965 6.5% 4% 1.9% Expansion. U.S. entered Vietnam War. Fed raised rate to 4.32%.
1966 6.6% 3.8% 3.5% Expansion. Fed raised rate to 5.76%.
1967 2.7% 3.8% 3% Expansion. Inflation at 3%.
1968 4.9% 3.4% 4.7% Expansion. Fed raised rate to 6%.
1969 3.1% 3.5% 6.2% Nixon became President. ARPANET created. Man landed on the moon. Fed raised rate to 9.19%. Expansion until December peak.
1970 0.2% 6.1% 5.6% Contraction until November trough. Fed lowered rate to 4.9%.
1971 3.3% 6% 3.3% Expansion. Fed lowered rate to 3.5%, then raised it to 5%. Nixon imposed wage-price controls in August to stem inflation.
1972 5.2% 5.2% 3.4% Expansion.
1973 5.6% 4.9% 8.7% Nixon withdrew U.S. from Vietnam in January, took dollar off gold standard in August, tripling inflation. Fed doubled rate to 11% in response. Expansion continued until November peak.
1974 -0.5% 7.2% 12.3% Contraction and stagflation. Nixon resigned over Watergate in August, Ford became President. Fed raised rate to 13%.
1975 -0.2% 8.2% 6.9% Contraction ended with March trough. Fed lowered rate to 7.5%.
1976 5.4% 7.8% 4.9% Expansion. Fed lowered rate to 4.75%.
1977 4.6% 6.4% 6.7% Expansion. Carter became President. Inflation at 6.7%.
1978 5.6% 6% 9% Expansion. Fed raised rate to 10%.
1979 3.2% 6% 13.3% Expansion. Fed raised rate to 15.5%, then lowered it to 12% confusing price-setters who kept prices high.
1980 -0.2% 7.2% 12.5% Expansion peaked in January. Fed raised rate to 20% by March, lowered it to 8% by June. Contraction ended in July, so Fed raised rate to 20% by December.
1981 2.6% 8.5% 8.9% Reagan became President. Fed raised rate to 20% in January, lowered it to 16% in April, raised it to 20% in May. Expansion peaked in July. Fed lowered rate to 12% by year end.
1982 -1.9% 10.8% 3.8% Contraction ended with November trough. The Garn-St. Germain Depository Institutions Act was passed to fight recession. Fed lowered rate to 8.5%.
1983 4.6% 8.3% 3.8% Expansion. Reagan increased military spending.
1984 7.3% 7.3% 3.9% Expansion.
1985 4.2% 7% 3.8% Expansion.
1986 3.5% 6.6% 1.1% Expansion. Reagan cut taxes.
1987 3.5% 5.7% 4.4% Expansion. Black Monday stock market crash in October.
1988 4.2% 5.3% 4.4% Expansion. Fed raised rate to 9.75%..
1989 3.7% 5.4% 4.6% Expansion despite 1989 Savings and Loan Crisis. Fed lowered rate to 8.25%.
1990 1.9% 6.3% 6.1% Expansion hit peak in July, began contracting.
1991 -0.1% 7.3% 3.1% Contraction until trough in March. Fed lowered rate to 4%.
1992 3.6% 7.4% 2.9% Expansion. Fed lowered rate to 3%.
1993 2.7% 6.5% 2.7% Expansion.
1994 4.0% 5.5% 2.7% Expansion.
1995 2.7% 5.6% 2.5% Expansion.
1996 3.8% 5.4% 3.3% Expansion.
1997 4.5% 4.7% 1.7% Expansion.
1998 4.4% 4.4% 1.6% Expansion.
1999 4.8% 4% 2.7% Expansion.
2000 4.1% 3.9% 3.4% Expansion.
2001 1.0% 5.7% 1.6% Expansion peaked in March, contracted until November trough.
2002 1.8% 6% 2.4% Expansion.
2003 2.8% 5.7% 1.9% Expansion.
2004 3.8% 5.4% 3.3% Expansion.
2005 3.4% 4.9% 3.4% Expansion.
2006 2.7% 4.4% 2.5% Expansion.
2007 1.8% 5% 4.1% Expansion peaked in December.
2008 -0.3% 7.3% .1% Contraction.
2009 -2.8% 9.9% 2.7% Contraction troughed in June, began expansion.
2010 2.5% 9.3% 1.5% Expansion.
2011 1.8% 8.5% 3% Expansion.
2012 2.8% 7.8% 1.7% Expansion.
2013 1.9% 6.7% 1.5% Expansion.

 

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