2.6% GDP: A Closer Look

Chip Corley |

Real gross domestic product (GDP) grew at a 2.6% annualized rate in the second quarter of 2017. Nominal GDP (unadjusted for inflation) during this period grew at 3.6%: both figures were considerably above their 10 year averages of 1.5% and 3.0% respectively, as illustrated below. The GDP figure is considered the most important economic indicator.

Professionals, pundits, market soothsayers, and the like create quite a stir about our country’s growth rate. They ask, “Is the economy growing fast enough? Is the trajectory sustainable? How will we expand jobs without faster growth? What about our national debt?” These are just a few of many headlines clamoring about the most recent GDP report.



Certainly, there is plenty of surface noise to rattle investors' nerves. The solution to this dilemma is digging deeper, i.e. below the media static and into the numbers. Take a look at the following pie charts. The first chart breaks down the four major segments of the GDP. At first glance, which areas would you be interested in allocating some of your money? There are 325 million people in the U.S., and these consumers are the supermajority of GDP growth.

The majority of the second quarter’s GDP growth came from consumer spending. Take a look at the consumer spending pie chart and notice the breakdown: 65% of all consumer spending is for services such as restaurants, entertainment, tourism, accounting, medical and hairstyling; 14% is for long lasting durable goods like autos, furniture, washing machines and dryers; and 22% of consumer spending goes toward nondurable goods that last a relatively short period of time: fresh vegetables, food, clothes, beer, office supplies and personal products. These are only a few of the vast goods and services available for consumer consumption.

The facts speak loud and clear; the service sector is an economic locomotive and for long term investors it’s an area worth taking a closer look.


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