The Shocking Truth About U.S. Economic Growth

The growth of the U.S. economy has been labeled as tepid and slow, but reality may not match perception in this instance.

Feb 1, 2014 at 2:00PM

Don't listen to the media. The economic recovery in the U.S. is better than anyone wants you to believe.

While the U.S. economy has continued to gain steam following the end of the Great Recession, many have begun to question why the recovery hasn't rebounded from the depths of the crisis, like previous recessions. In June of last year, The Wall Street Journal ran an article titled "Slow-Motion U.S. Recovery Searches for Second Gear."


There was the Time magazine cover in April 2012 called "The Wimpy Recovery," with the sub-headline "Yes, the economy's getting stronger. But why does it feel weak?" Just last week, CNN ran a story called "State of the Union: Economy -- for many, a slow recovery." And while there is no denying things are improving from where we've been, countless have wondered if this is where we should be.

Things can still get better, but the U.S. economic recovery is in a much better place than first glance would indicate.

Beyond one number
Gross domestic product, or GDP, is the measure of a country's total economic output. It takes all the consumer, government, and business spending, and then it adds in its net imports, which is the difference between what it exports to other countries versus what it imports in. It is one of the most common and vital important indicators of how healthy, or unhealthy, a country's economy is.

A recession is actually measured when the GDP of a country falls for two consecutive quarters, which means total output across all four major categories added together falls. Since 1950, there have been 10 recessions, and the longest one, lasting 18 months, was the most recent one, which lasted from December 2007 to June 2009.

But as shown in the following chart, in the four and a half years since the recession ended (how far we're currently removed from the last recession) the recovery has been the most tepid, with GDP growing by only 11% since it bottomed out in June of 2009:

The reason for the slow recovery
With the slow recovery in mind, it's easy to think many are right to proclaim the idea that the status of the U.S. as the economic superpower is waning, and it won't be long before China and other countries begin to overtake it. However, while it may seem like the recovery has been slow based on a glance at GDP, it's worth exploring all five parts of GDP to get a true understanding.

One of the biggest reasons for the supposed slow growth following the end of the most recent recession is that government spending (which represents roughly 20% of total GDP) has fallen by 7%, or $225 billion, over the past four and a half years.
And while personal consumption -- which is the biggest component of the GDP -- is still the slowest moving, investment by businesses was the fourth fastest, while the total improvement in net exports (exports-imports) was the second best.

In fact, if you simply exclude the government spending component of GDP, growth moves from 11% to 16.4%, which still places it ninth, but it narrows the gap considerably:

The Foolish bottom line
While many people will tell you the U.S. economy is losing steam and its stronghold as the world's dominant economic power because the growth in GDP following the Great Recession isn't what we typically see, it's vitally important to account for and measure all the components of GDP, not just the raw number.

Although 16.4% growth isn't going to garner any front-page attention, the truth is, the current economic recovery is much better than many people are willing to give it credit for.

Buying the right companies for the recovery
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4 in 5 Americans Are Ignoring Buffett's Warning

Don't be one of them.

Jun 12, 2015 at 5:01PM

Admitting fear is difficult.

So you can imagine how shocked I was to find out Warren Buffett recently told a select number of investors about the cutting-edge technology that's keeping him awake at night.

This past May, The Motley Fool sent 8 of its best stock analysts to Omaha, Nebraska to attend the Berkshire Hathaway annual shareholder meeting. CEO Warren Buffett and Vice Chairman Charlie Munger fielded questions for nearly 6 hours.
The catch was: Attendees weren't allowed to record any of it. No audio. No video. 

Our team of analysts wrote down every single word Buffett and Munger uttered. Over 16,000 words. But only two words stood out to me as I read the detailed transcript of the event: "Real threat."

That's how Buffett responded when asked about this emerging market that is already expected to be worth more than $2 trillion in the U.S. alone. Google has already put some of its best engineers behind the technology powering this trend. 

The amazing thing is, while Buffett may be nervous, the rest of us can invest in this new industry BEFORE the old money realizes what hit them.

KPMG advises we're "on the cusp of revolutionary change" coming much "sooner than you think."

Even one legendary MIT professor had to recant his position that the technology was "beyond the capability of computer science." (He recently confessed to The Wall Street Journal that he's now a believer and amazed "how quickly this technology caught on.")

Yet according to one J.D. Power and Associates survey, only 1 in 5 Americans are even interested in this technology, much less ready to invest in it. Needless to say, you haven't missed your window of opportunity. 

Think about how many amazing technologies you've watched soar to new heights while you kick yourself thinking, "I knew about that technology before everyone was talking about it, but I just sat on my hands." 

Don't let that happen again. This time, it should be your family telling you, "I can't believe you knew about and invested in that technology so early on."

That's why I hope you take just a few minutes to access the exclusive research our team of analysts has put together on this industry and the one stock positioned to capitalize on this major shift.

Click here to learn about this incredible technology before Buffett stops being scared and starts buying!

David Hanson owns shares of Berkshire Hathaway and American Express. The Motley Fool recommends and owns shares of Berkshire Hathaway, Google, and Coca-Cola.We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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