Since it's been a while since we last looked at GDP in the U.S., we thought we'd take this opportunity to look both backwards and forwards at it.
Let's look backwards first. Our first chart shows how the nation's Gross Domestic Product has evolved since the first quarter of 2012 and reveals how factors like the Fed's various Quantitative Easing (QE) programs, minor government spending cuts and President Obama's tax hikes have affected the nominal measure of the U.S.' national income:
As we noted in our last installment, much of the organic growth in 2013-Q3 was literally the result of organic growth, as the U.S. benefited from bumper crops in almost every agricultural category. Along with what turned out to be optimistic production by U.S. automakers in that quarter, that growth then carried over into the fourth quarter, where much of the nation's 2013 agricultural bounty left for foreign markets, boosting GDP once again through higher levels of exports.
That organic economic growth is why the Federal Reserve believes it can safely taper its QE program's purchases of U.S. Treasuries and Mortgage-Backed Securities, since the economy would appear to be more capable of generating the growth needed to offset the negative effects of the fiscal drags upon it.
That's all well and good, but that's the past. Since we actually work in the future, it's tomorrow's GDP that holds more interest for us. Our second chart shows what we forecast for the not-yet-completed first quarter of 2014, in the real terms of constant 2009 U.S. dollars:
In this chart, we show the midpoint of our target range for GDP in 2014-Q1 is $16,062.1 billion. Speaking of that target range, here are the probabilities that GDP will be between the following values in 2014-Q1:
- There is a 68.4% probability that U.S. GDP will be between $15,808 billion and $16,131 billion.
- There is a 95.0% probability that U.S. GDP will be between $15,646 billion and $16,293 billion.
- There is a 99.8% probability that U.S. GDP will be between $15,485 billion and $16,454 billion.
Left unsaid, but hopefully obvious, is that there's a 50% chance that the nation's real GDP will fall below our target range midpoint value of 16,062.1 billion 2009 U.S. dollars, and a 50% chance that it will be above that value.