Tuesday, May 25, 2010

U.S. Economy on Continued Life Support

Calculated Risk details that according to the CBO, stimulus (i.e. the American Recovery and Reinvestment Act "ARRA") raised GDP in Q1 by an estimated range of 1.7% to 4.2%. Since reported GDP growth was 3.2% annualized for the quarter, this means that if the impact of stimulus was at the high-end of the range, GDP "would have" been negative in Q1.

The chart below shows actual GDP and a range for GDP ex-stimulus (simply actual GDP less the estimated impact of the stimulus at the low and high-end ranges as detailed by the CBO).

The bad news?

This shows just how fragile the system is.

The good news?

The impact of stimulus is expected to be strong the remainder of the year (Q2 '10: 1.7% - 4.6%, Q3 '10: 1.4% - 4.2%, Q4 '10: 1.1% - 3.6%)

Source: BEA