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What is a good rate of GDP growth?

First, it’s important to understand that the GDP growth rate can bounce around a lot from quarter to quarter. Here’s what growth rates in the US looked like from 2000 to 2014.

GDP growth FRED

Aside from the recessions (the areas shaded in gray), GDP growth over that period has been anywhere from slightly negative to 7.8 percent.

The thing to look for is where that growth is centered. In the US, one quarter of slightly negative growth isn’t necessarily awful, and one quarter of 7 percent growth doesn’t necessarily mean the economy is really heating up. A few quarters of negative growth, however, tend to mean something is really wrong. Likewise, more than a few quarters of super-fast growth would be unsustainable, and could mean the economy is overheated and that inflation is or will soon be a problem.

It’s not an exact science, but growth that’s centered somewhere around 3 or 3.5 percent is considered strong in the US. The country hasn’t quite attained that level of sustained growth yet since the recession.

But it’s not the same in every country. Developing nations can often produce much faster economic growth for years on end, as they catch up to the developed world by doing things like improving their infrastructure.

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