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May 22, 2009
The pulse of the economy
Just as a doctor treats a patient, economists periodically take the pulse of the economy in order to gauge its condition. The latest reading just came out. What does it show? Listen
Dr. Mike Walden, North Carolina Cooperative Extension economist in the College of Agriculture and Life Sciences at N.C. State University, responds:
"This is our broadest ready of the economy; it's called gross domestic product, and we look at how fast it grows in any given period of time. And so we have numbers for the first three months of this year, and the numbers showed that gross domestic product dropped at an annual rate of over 6 percent, about the same as it dropped in the last three months of 2008. Now on the surface, that seems bad. Actually, after that report came out, the stock market went up. So what's going on? Well, what analysts did is they looked behind that number, and they saw that there were actually some encouraging signs. For example, consumer spending actually went up, and inventories went down. Now, why are those two things important? Well, consumer spending, of course, drives the economy. We consumers account for 70 percent of the economy. So if there are signs that consumer spending is coming back, that certainly bodes well for the economy down the road. Inventories dropping . . . that's actually a good sign because that means that at some point, businesses are going to need to restock their inventory, what they have in stock, so to speak. That means they'll have to restart production lines and bring back people. So all in all, although overall this number went down and showed a declining economy, there were some bright signs and hopefully those bright signs will get bigger down the road."
Posted by Dave at May 22, 2009 08:00 AM