I don’t trust the U.S. government’s inflation number for measuring real GDP. The annual rate of inflation in this measurement is only 2.2%, while the Consumer Price Index (CPI) is running at a 4.0% clip. That’s as large a differential as you’ll see between two government inflation statistics.
As a result, I have looked at real GDP growth using the official GDP deflator and using annual CPI inflation figures. Nominal GDP is deflated using the official BEA inflation number in red and using the CPI number in blue. The seasonally adjusted CPI numbers are the chart above and the non-seasonally adjusted CPI numbers are the chart below.
What is clear from both of these graphs of real GDP growth over the past 10 years is that economic growth, as measured by the U.S. government, is artificially high at economic turns. This was true in 1999-2001 as much as it is now. Notice the huge gap between the blue and red lines in 2007-2008. The blue lines show annual real GDP growth decelerating rapidly, while the red line shows almost no change.
My ultimate conclusion is that, as the economy turns down, the official GDP numbers have overestimated GDP growth, because they tend to use an artificially low rate of inflation.