Q4: The Third Straight Quarter of Below-Trend Growth

by: Eddy Elfenbein

Eddy Elfenbein submits: The economy grew by 2.5% for the fourth quarter (technically, it was 2.452%).

Three percent is the Magic Line in GDP growth. Once the economy starts growing less than 3%, it will tend (though not always) to keep doing that for several quarters. The fourth quarter was the third straight quarter of below-trend growth.

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GDP Growth

Corporate profits had been growing faster than the economy, but that has probably come to an end. For the third quarter of 2006, corporate profits comprised 12.41% of the overall economy, which was the largest share in over 50 years. In the fourth quarter, it dropped to 12.25%.

Corporate Profits/GDP