Final Sales of Domestic Product grew at a 2.9 percent annual rate in the second quarter according to the revised figures. I favor a 3% target and so this figure is nearly there. Unfortunately, the level of Final Sales of Domestic Product remains way too low, and it will never catch up at this rate.
Interestingly, the inflation rate estimated Final Sales of Domestic Product grew at a 1.9% annual rate. This is close to the Fed's target for inflation (thought the core CPI is their favorite measure of the price level.) Note that this implies that real Final Sales of Domestic Product is growing approximately 1 percent. While the productive capacity of the economy is supposedly growing slowly, this growth rate of real expenditures will result in a growing output gap.
It is interesting that there was deflation for both durable and nondurable consumer goods, and a 1.8 percent inflation rate for consumer services. Deflation continued to impact equipment and software and residences. Oddly enough, nonresidential structures had a 2.6% annual inflation rate.
The most significant inflation rate was exports--4.8%
Professor, what do you see for the economy going forward? Would love to hear your thoughts or outlook.
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