Despite some lingering concerns, the US economy continues to chug along in 2014. The Bureau of Economic Analysis (BEA) released it’s the second estimate of third-quarter real GDP growth yesterday and it came in at 3.9% annualized.
That’s not a terrible number, but it’s not a great one either. This persistent, weak growth continues to be the hallmark of what is one of the most muted economic recoveries in US history. We’re closing in on year 5 of the expansion that began in 2009, and we never saw that “v-shaped” bounce that many were expecting.
According to the National Bureau of Economic Research (NBER), economic expansions average about 48 months. As we pass 60 months, one common question is does slower than average growth mean longer than average expansion? That makes sense if we assume that the amount of growth generally increases or at least doesn’t decrease in real terms across expansions.
I haven’t looked at the data, but I assume it would show a general trend of such, due to population growth and productivity gains if nothing else. A general trend wouldn’t be enough to predict what happens next year anyway, but it can help explain why the economy, though weak, has been so persistent.
Victor K. Lai, CFA
This blog is for informational purposes only. Nothing on this blog represents advice. Investing is inherently risky and involves the potential for loss. Victor Lai does not own any of the securities referenced in this posting. Clients of Bellwether Capital Management LLC may own shares of the securities referenced in this posting.
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