Saturday, July 28, 2007

Nominal GDP continues to recover

Although real GDP growth was rather weak in Q1 (0.6%), nominal GDP growth (which is actual GDP growth before inflation is subtracted) was reasonably decent (4.9%) and in fact greater than nominal GDP growth in Q4 of 2006 (3.8%.) Nominal GDP in Q2 (6.2%) grew at its fastest pace since Q1 of 2006.

The low point of nominal GDP growth was in Q3 (3.4%), last summer, and has been growing at an accelerating pace every quarter since.

Sure, we do have to take inflation into account, but with the high volatility of energy and commodities prices, we do need to start our analysis with nominal growth, since consumers and businesses actually pay nominal prices and real GDP growth is derived from nominal GDP growth, not the other way around.

-- Jack Krupansky

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