Thursday, July 31, 2008 0 comments ++[ CLICK TO COMMENT ]++

Preliminary US 2Q 2008 GDP Comes in at 1.9%... 4Q 2007 Revised Down to -0.2%

Well, the preliminary second quarter US GDP number came in at 1.9% so things are still neither good nor bad. But last year's fourth quarter was revised down to -0.2%, signalling a potential start of a recession.

Annual revisions in the report also showed that the economy contracted in the fourth quarter of 2007, falling 0.2% for the first drop in real gross domestic product since the recession of 2001. The economy grew at a revised 0.9% annual rate in the first quarter.

The second quarter was boosted by government stimulus (about $80 billion) so it's not clear what the actual rate would have been without the government help.

I am still of the opinion that there is a high probability that the economy won't deteriorate as much as many as expecting. I actually think that USA may grow very slowly (between 0% and 1.5%) for the time being. My thinking is based on the view that unemployment may not rise significantly in this slowdown. I am influenced by GaveKal's thinking and believe that the most cyclical elements of the US economy (basically manufacturing) has been outsourced away. So I really don't see the typical scenario of mass layoffs arising from too much production.

The risk for investors, in my opinion, is not the economic growth per se (most assets are pricing in a slowdown.) Rather, it's the possibility of inflation or deflation (i.e. no more goldilocks on the inflation front).


No Response to "Preliminary US 2Q 2008 GDP Comes in at 1.9%... 4Q 2007 Revised Down to -0.2%"

Post a Comment