Sample Essay on GDP

In the National Income and Product Accounts release for the initial quarter of this year, the real gross domestic product (GDP) shrunk in this year’s first quarter by 0.7 percent based on to the subsequent estimate. This is a negation to the trend that saw the real GDP increase by 2.2 percent in the final quarter of last year. In the advance estimate issued in April of 2015, the real GDP had been shown to have risen by 0.2 percent(Matalon, Pinard and Aversa). The difference between the figures for the first and second estimate is attributable to a higher increase in imports as well as a lower increase in private inventory investment than had earlier been estimated.

For the period under consideration, last year’s final quarter showed the highest amount of increase in real GDP with the increase being to the tune of 2.2 percent. The opening quarter of this year experienced the least amount of growth. According to the advance estimate, the rise in real GDP for this quarter was 0.2%, with the figure falling to a decrease of 0.7 percent according to the subsequent estimate.

If the current trend continues, GDP is expected to increase during the year, but at a rate lower than that experienced in the final quarter of last year. This opinion is attributable to data available on current trends of GDP and employment rate of factors in the economy. There are numerous factors that affect the real GDP, with some increasing it and affecting it adversely. In the first quarter, for instance, there were negative contributions from state and local administration spending, non-residential fixed investment, and exports. There was also an upsurge in imports which subtracts from the GDP calculation. These factors explain the negative trend in the second estimate of GDP.

Despite the trend that depicts that GDP was negative, the rate is expected to increase, albeit at a rate lower than the one experienced in the closing quarter of 2014. This is because according to the data available for the first quarter, the rates of growth or reduction in factors that impact on GDP were lower than for the closing quarter of last year. Real personal consumption expenditure for instance increased by only 1.8 percent for the first quarter as equated to 4.4% in the last. Real non-residential, flat investment decreased by 2.8 percent for the first quarter as compared to an escalation of 4.7% in the closing quarter (Matalon, Pinard and Aversa). There was a reduction in real gross national product from the preceding quarter, a trend that was also exhibited by the real gross domestic income. These negative trends were partly compensated by optimistic contributions from personal inventory investment, personal consumption expenditure, and residential fixed investment.

The most significant factor that will adversely affect the real GDP for 2015 is economic factors outside the US. Russia, for instance, is on the periphery of a recession owing to sanctions related to the Ukraine conflict. Other nations in the Eurozone are either undergoing a recession or on the brink of one. These include Germany, Italy, Greece and France. Since 40% of the S&P 500 enterprises derive their sales from Europe, the economic slowdown in the Eurozone will affect earnings(John). Major forecasts articulate a lower real GDP rate for 2015 than the 2014 one, but higher than the estimates for the opening quarter in 2015. These include the US Economic Forecast, the OECD Forecast, and the European Commission (EC) Forecast(Knoema).

Works Cited

John. “What Is the U.S. Economic Outlook for 2015? Good, if You’re Rich.” 21 June 2015. Document. 21 June 2015.

Knoema. “OECD Economic Outlook No 97, June 2015.” 1 June 2015.

Matalon, Lisa, Kate Pinard, and Jeannine Aversa. “National Income and Product Accounts.” 29 May 2015. Document. 21 June 2015.