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Historical Economic Growth

IN 2017, NOMINAL gross domestic product grew 4.1% and real GDP—meaning growth above the inflation rate—was up 2.3%, versus a real rate of 1.5% in 2016.

Both years were below the average 2.8% real rate for the 50 years through year-end 2017, according to statistics from the U.S. Department of Commerce’s Bureau of Economic Analysis. Between 1997 and 2000, we had four consecutive years with GDP growth above 4%. Since then, we’ve had only two years—2004 and 2005—when growth reached 3%. Real GDP growth was dragged down by the Great Recession, with the economy shrinking 0.3% in 2008 and another 2.8% in 2009. But even before the Great Recession, economic growth was tepid. Real GDP has grown just 1.8% a year in the 17 full calendar years since year-end 2000, compared with a 3.4% annualized rate for the 10 years prior to that.

A big question: Are there structural impediments that are restraining economic growth, and do those impediments mean we won’t return to the 50-year average of almost 3% a year?

Some experts have argued that income inequality is crimping economic growth. Low-income earners tend to save less of their income and spend more, so sluggish wage growth could mean slow economic growth. Others wonder whether the economy is being hurt by the aging population and the workforce’s slower growth.

All this should concern stock investors. The reason: Slow economic growth would mean slower growth in corporate profits—and that would be bad news for share prices.

Next: What Drives Growth

Previous: Inflation

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