The Trendline of Real GDP

Friday’s GDP report was not a good one. The government revised its estimate of Q1 GDP growth to non-growth, down 0.7%. In the 23 quarters of expansion, this is the third time growth has been negative. They’ve all been Q1s.

This expansion has been far below average. In the last 23 quarters, the economy has averaged 2.2% annualized growth. The economy used to average 4% or 5% growth during expansions followed by -2% or 3% in sharp pullbacks during recessions. Now it’s sluggish growth all the time.

Here’s a good way of expressing just how poorly the economy has done. This is real GDP and I divided it by a trendline that grew at a constant rate of 3.28% per year.

It’s been 15 years since the economy expanded faster than its long-term growth rate. To be fair, I think slower population growth also plays a role.

Posted by Eddy Elfenbein on June 1st, 2015 at 3:24 pm

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