ABCs of the GDP

GDP is Gross Domestic Product. It is a measure of the economic activity, and it’s like taking the temperature of the economy. You want it to be moving along nicely, but we don’t want to get too overheated. So we look at how this is taken and what our results are.

It is measured by quarter, and the bad news is that the first quarter was terrible. It was a - 2.9%. Normally, if we have two consecutive quarters that are negative, it could mean a recession; but we knew that our weather was really bad and hurt our overall economy. The second quarter’s numbers came out, and they were great. They were at 4%.

More than that, we also look for any kind of revisions in the data. They revised the first quarter—still negative but not as negative—to -2.1%. They also revised the last two quarters of 2013. That was all excellent news; our economy is moving along at a nice clip at this point.

Now what makes up those numbers? There are four pieces, and we can look down into the data in those four pieces. The first is “G”: Government Spending. What we have seen is that sales tax revenue is up. We certainly have seen that here in Mississippi. Because of that, state and local governments are spending more, which is boosting the economy. Then the big “C”: Consumer Spending represents about 2/3rds of economic activity. We are spending more on durable goods. Those are things like cars and appliances and furniture. Business Spending or Investment Type Capital Spending, that is more. The final piece is Net Exports. All of that means excellent news for us.

The question is: What piece of data do we watch for next? Jobs. Tomorrow morning, first thing in the morning, we’re going to get the July jobs report, and it’s very important to see what’s happening there, because that will push our economy even more. We’re looking for jobs of over 200,000 new jobs created, and we’re hoping for a drop in the unemployment rate to 6%. We also watch to see if there is an increase in hourly wages. All of that means more of us working, more of us bringing home more, spending more, helping to boost our economy and keep it rolling.

#economy #financialadvisor #feeonlyfinancialadvisor #financialplan #investmentadvisor

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