Economic Growth and Economic Indicators

Economic growth is measured by the change in real GDP. Real GDP is the total value of all of the goods and services produced in a year, adjusted for inflation. GDP, though not the best indicator of the quality of life, nations with a high GDP correlate to nations with a higher quality of life. The changes in real GDP for 2013 general trend of increasing GDP and hence increasing economic growth. The latest estimate for fourth quarter fiscal year 2013 is 2.4 percent change in GDP. GDP increased in quarters 1-3 of 2013 but decreased in the fourth quarter. The decrease in the fourth quarter may be problematic for continued economic growth but the general trend of increasing GDP offsets this worry. (see Index 1)

Consumer activity

Recent changes in economic indicators that monitor consumer activity suggest; that economic growth is occurring ,as evident by an increase in personal disposable income and consumer expectations of the economy. The economic indicators that monitor consumer activity are the Consumer Sentiment Index(CSI), the Personal Consumption Expenditure(PCE), and real personal disposable income. The CSI measures consumer confidence in the current economy, the future economy, and the consumers’ own financial health. The CSI can thus illustrate how willing consumers are to consume and how willing they are to save. Low confidence levels can result in less consumption of goods and services as consumers may feel that they are not financially stable or the current economic situation is not conducive to spending. Consumers may thus save more money. If consumers spend less then a decrease in real GDP will occur as consumer spending makes up two-thirds of the GDP. The PCE measures the total spending on goods and services by consu...

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...also increases in December 2013 where as both the change in PCE and PDI decreases in December 2013. The increase in December 2013 of the CSI can be explained by the continued increase from October 2013-November 2013. Consumer confidence continued to increase then because consumers felt confident in a pattern of increase. CSI thus decreased in January 2014 in response to the decrease in PDI and PCE in December 2013. PDI and PCE both increased in January 2014.For all three indicators, the general trend is a positive increasing trend. CSI has an extra data point for February 2014 and thus all current data shows an increase from the previous data point. This points towards increased spending due to increasing disposable income which in turn will create an increase in consumer sentiment. Thus it seems that the consumer activity indicators point towards economic growth.