Thursday, January 26, 2012

1953: GDP and Contributions to Growth

According to the NBER, the early 1950s expansion lasted from October 1949 to July 1953.  We can clearly see the contraction in the last two quarters in this chart:

We see the economy growing strongly in the first quarter, hitting a 7.7% growth rate.  Consumers are adding a fair amount to the overall growth, but the real contributor is government spending, which accounts for 43% of overall growth.  We see the same type of scenario play out in the second quarter, but government spending now accounts for 70% of all economic growth.  The third fourth quarter have contractions, where the big contributor to the contraction is the drop in investment, with consumer spending and government spending also contributing to the slowdown.

Also note the severity of the contraction, especially in the fourth quarter, where we see the economy contract by 6.2%.  That's a very large drop, and one we're not use to seeing.