Q3 GDP Revised to 2.7%

Good but not great economic news this morning. Real GDP growth for the third quarter was revised higher to 2.7% from the initial report of 2%. This is the 13th quarter in a row of positive GDP growth.

As a small side note, which I think is interesting, one of the economic ideas that’s been talked about recently is that the Fed should try to target nominal (meaning not inflation-adjusted GDP). So if nominal GDP falls below some trend line growing at, say, 5%, then the Fed should lower rates. Conversely, if the economy is growing faster than the trend line, they ought to raise rates.

What I noticed today when looking at the data is the nominal GDP has been growing by almost exactly 4.1% for three years. In fact, I don’t think the Fed could have done a better job targeting it to 4.1% if they tried.

This chart has real GDP growth (the blue line) and I added a trend line increasing at 4.1% (in black).

Posted by on November 29th, 2012 at 10:43 am

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