Kiplinger's GDP Outlook: Economic Growth Slows to Normal

The economy’s quarterly growth rate will likely average 2% from now on.

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First-quarter GDP growth of 1.6% isn’t as bad as it looks.
First, the economy had exceeded its speed limit in the third and fourth quarters last year, so a slowing was expected. Goods spending, for example, had been on a tear and couldn’t keep up that pace for long. Second, most of the reason for the slowdown from the fourth quarter’s 3.4% GDP expansion was that imports picked up, which happens when domestic demand is strong. In fact, domestic demand grew 2.8% in the first quarter, down only a little from 3.6% the previous quarter. When imports rise, that subtracts from GDP growth. Finally, we expected that economic growth would slow to a more normal rate, which is about 2%. The economy’s potential growth rate in the long run is dependent on productivity growth and labor force growth, and those two factors point to a roughly 2% long-term growth pattern.

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David Payne
Staff Economist, The Kiplinger Letter

David is both staff economist and reporter for The Kiplinger Letter, overseeing Kiplinger forecasts for the U.S. and world economies. Previously, he was senior principal economist in the Center for Forecasting and Modeling at IHS/GlobalInsight, and an economist in the Chief Economist's Office of the U.S. Department of Commerce. David has co-written weekly reports on economic conditions since 1992, and has forecasted GDP and its components since 1995, beating the Blue Chip Indicators forecasts two-thirds of the time. David is a Certified Business Economist as recognized by the National Association for Business Economics. He has two master's degrees and is ABD in economics from the University of North Carolina at Chapel Hill.