Weak GDP Growth Reflects Poor Demographics

26 June 2013

GDP growth for the first quarter was only 1.8%, less than the expected 2.4%. Since the recession of 2009, the recovery has been anemic compared to previous ones. See table below. There are some features which differentiate the 2008-09 recession. Most notable among them was the crisis suffered by the major banks and their subsequent inability or reluctance to lend. Another factor in the current recovery, and in our view a more substantial one, is the poorer demographic picture in the US which has resulted in weaker demand growth.

 Number of quarters with n+ GDP growth
 in the 15 quarters following recession of:
n —-> 2% 3% 4%
1991 12 8 7
2001 11 7 2
2009 8 3 2

31 July 2013 Update: GDP growth for Q1 was revised down again today to 1.1%, less than half the estimate from two months ago.  The first estimate for Q2 is 1.7%.

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