Friday, July 29, 2011

Economists React to Second Quarter GDP: "Recovery? What Recovery?"

Phil Izzo does the heavy lifting.
From Real Time Economics:
Economists and others weigh in on the latest reading on gross domestic product.
Recovery? What recovery? Economic growth has largely stalled led by a depressed consumer and budget cutting state and local governments. Household spending came to a screeching halt as vehicle sales tanked in the spring. That created a sharp decline in durable goods spending. Businesses continued to invest but the demand for equipment and software grew at the slowest pace in two years. And then there were state and local governments, where budget cutting has become de rigueur. The slicing and dicing reduced economic growth by over 0.4 percent point. That is not chump change and shows that my comment that there is no such thing as a free budget cut was not just a cute phrase. Thankfully, the trade deficit narrowed on solid increases in exports and weak imports. That kept growth above one percent. –Naroff Economic Advisors

Recovery, we hardly knew ya! Economic growth is clearly flagging in the U.S., and the most troubling thing about it is that distress in Washington limits the policy response. As a result, we see a greater potential that the current slow patch could transition into a longer period of deeply disappointing results, and even a possible recession. While odds of such a recession are still modest, today’s results indicate an increasing probability. –Guy LeBas, Janney Montgomery Scott

As bad as Q2 was, the revision to Q1 is what got my attention.