The US economy is not yet on the road to recovery

Getting the economy growing at a more rapid pace will inevitably require another round of stimulus from the government

Dean Baker
guardian.co.uk, Monday 2 August 2010 19.00 BST

The 2.4% GDP growth figure reported for the second quarter caused many economists to once again be surprised about the state of the US economy. It seems that most had expected a higher number. Some had expected a much higher number. It is not clear what these economists use to form their expectations about growth, but it doesn't seem that they have been paying much attention to the economy. For those following the economy, a weak second quarter growth number was hardly a surprise.

As a basic way to assess growth, economists often separate out final demand growth from GDP growth. The difference between GDP growth and final demand growth is simply inventory accumulation. If the rate of inventory accumulation accelerates then GDP growth will exceed final demand growth. If the rate of inventory accumulation slows, then GDP growth will be less than the rate of final demand growth. If there is no change in the rate at which inventories are accumulating, then GDP growth will be equal to final demand growth.