All economic reports lately are “worse than anticipated”. The only way to characterize this report is grim. The stock market is tanking today in response to the GDP report and the crazy game of chicken being played in Washington. As I write gold is soaring, an ounce will cost you $1,630.-Lou
GDP grows slender 1.3% in second quarter
WASHINGTON (MarketWatch) — A new government report on the nation’s output showed the economy in much weaker shape than anticipated, casting doubt on the strength of the expected recovery in the final six months of the year.
Gross domestic product expanded at a paltry 1.3% annual rate in the second quarter, the Commerce Department said Friday, below the 1.6% growth rate that economists anticipated. See MarketWatch economic calendar.
But it was a drastic downward revisions to first-quarter GDP that stole the show and set economists on edge.
At the same time, inflation picked up steam in the second quarter.
The core personal consumption expenditure index — an inflation gauge that excludes food and energy prices that the Federal Reserve closely follows — rose 2.1% in the second quarter, the fastest pace since the fourth quarter of 2009.
Analysts knew there was a chance that the portrait of the economy might change because the government report included revised growth estimates for the last three years.
Growth has averaged 2.5% over the past two years. This is not a strong enough pace to bring down the unemployment rate that is stuck above 9%, and the data raises questions about the prospects for a second term for President Barack Obama.
The data also raise fears about the second-half pickup — the Blue Chip survey had estimated a 3.2% expansion — that economists anticipated.
Nigel Gault, chief U.S. economist at IHS Global Insight, said there is no evidence from this report that the economy was picking up momentum in the third quarter.
“The more I think about prospects for the third quarter, the gloomier I get,” Gault said.