Not so Good, Not so Bad

Let's start with the definition of Gross Domestic Purchases, which I think more closely tracks the way average Americans feel than Gross Domestic Product does.

dir="ltr">Gross domestic purchases dir="ltr"> The market value of goods and services purchased by  href="http://www.babylon.com/definition/U.S._residents/English">U.S. residents, regardless of where those goods and services were produced. It is  href="http://www.babylon.com/definition/Gross_domestic_product_%28GDP%29/English">gross domestic product (GDP) minus  href="http://www.babylon.com/definition/Net_exports_of_goods_and_services/English">net exports of goods and services. Equivalently, it is the sum of  href="http://www.babylon.com/definition/Personal_consumption_expenditures_%28PCE%29/English">personal consumption expenditures (PCE),  href="http://www.babylon.com/definition/Gross_private_domestic_investment/English">gross private domestic investment, and  href="http://www.babylon.com/definition/Government_consumption_expenditures_and_gross_investment/English">government consumption expenditures and gross investment.

Source: href="http://www.bea.gov/beahome.html">U.S. Bureau of Economic Analysis

Pretty simple — GDP minus net exports equals Gross Domestic Purchases.  The trouble is that import price increases increase real GDP relative to real GD purchases.

Note well: IPD stands for implicit price deflator, which is a comprehensive measure of inflation.  Also, figures may not add due to rounding, timing differences, and errors in revisions.

But what I would like to point out from the last three quarters on Gross Domestic Purchases, is that the economy is growing at less than 1%, and inflation is running higher than 3%.

I realize that these could be statistical anomalies, but Gross Domestic Purchases is far closer to what the average American feels than GDP or GNP.  My main point is that we have a slow-growing economy in inflation adjusted terms, while felt inflation is rising.