GDP Update for Q2 2008

I missed an opportunity to post this last week, but there has been a revision to the GDP number for the 2nd quarter of 2008. Originally the number was 1.9% growth, but now the number is 3.3%. Analysts expected a higher revision, but the 3.3% beat the predicted 2.7%. (The Q2 GDP has since been revised to 2.8% on 9/26/08)

So what are the reasons for the good number (3.3% is a good number)?

  • Stimulus checks helped, but weren’t necessarily the engine.
  • Business inventories were less than expected meaning their goods are being purchased.
  • Global Trade! The weak dollar is the main reason for the upswing in the GDP. However, the US being weak causes a ripple effect in the world economy and that ripple is finally reaching some areas like China.

Summary – Although the GDP is up, the likelihood of it being a consistent trend is small. My guess is that the US has hit bottom and is starting the long cautious climb up. This will allow the US to lead the next recovery but it will be slow. Factors that are helpful now (weak dollar, low interest rates) will give way and something more transformative will need to take their place (investments in infrastructure, innovation in energy and health care, and education).

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One response to “GDP Update for Q2 2008”

  1. I think the BEA analysis is erroneous at best. Both at the initial GDP tally and the adjusted GDP. There is no doubt that the GDP is in contraction. How much it is hard to tell. But the contraction is in the US and overseas. All the signs and characteristics demonstrate a depression and sliding downward. Especially coupled with the high unemployment.A downward slide of home values can only continueeven after the unemployment picture improves. Could be years. Retailers are having problems again. The stock market could be headed for another bubble about to burst. They will expect to be saved again. If the auto industry goes downso will the US economy. We can make cookies as our nation product.

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