April Showers... GDP Growth Rate at Two-Year Low

Chart of the Week for April 29 - May 5, 2005

Gross Domestic Product (GDP), the broadest barometer of the U.S. economy’s health, increased at an annual rate of 3.1 percent in the first quarter of 2005. Output for the period was primarily affected by rising energy prices and weakened consumer and business spending.

GDP measures the output of goods and services produced by labor and property located in the United States. Typically, GDP growth rates positively correlate with employment, income, and savings and investment growth rates.

While the performance of GDP for the quarter was below expectations, it is in line with average GDP growth and therefore may not be as dismal as first perceived. In any event, many economists expect this trend in growth to continue for some time. Similar forecasts have been made for the performance of the U.S. domestic equity and fixed income markets. For investors, these forcasts are extremely important. If the forecasts prove to be true, growth rates in savings and investments will be as much a result of savings and investment contributions, as actual return on investments.

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