rebound is unlikely to last
Stimulus spent, housing still in dumps, GDP jump probably was aberration
By: Nobody wants to Claim a Prediction
Press Writer Aug 8, 3:45 MST
updated 2 hours, 55
- The economy pulled out of a dangerous rough patch in the spring, thanks
largely to strong exports, but the rebound isn't expected to last. Economic
slowdowns overseas could make exports tail off just as Americans are hunkering
down after the bracing impact of rebate checks wanes, plunging the country into
another rut later this year.
- How funny is that... The AP attempts to **** all over the Economy that's
Improving and the Market is up 212 points on the Day, and their Doom and Gloom
Story has an Image of the Great Day on the Market right next to it!
"Americans are Hunkering Down"... Jebus, if the AP had any Bigger a Bias on
Barry's Big Day, I'd Faint. Keywords in the the Headline and First
Paragraph: "Unlikely" and "Could". I'd continue with Commenting on the
Obsessing on Less than Perfect Economic Data in the AP's Attempt to Push this
Economy into a Recession, but it's an Old Tired Tune, and I am not Entertained
by it. - tha malcontent)
"There will be heavy sledding for the U.S. economy during the next couple of
quarters," predicted Lynn Reaser, chief economist at Bank of America's
Investment Strategies Group.
Gross domestic product, or GDP, grew at a 3.3 percent annual rate in the
April-June quarter, its fastest pace in nearly a year, the Commerce Department
reported Thursday. The revised reading was much better than the government's
initial estimate of a 1.9 percent pace and exceeded economists' expectations for
a 2.7 percent growth rate.
The rebound followed two dismal quarters. The economy actually shrank in the
final three months of 2007 and barely budged in the first quarter at a minuscule
0.9 percent pace. The 3.3 percent growth in the spring was the best performance
since the third quarter of last year, when the economy was chugging along at a
brisk 4.8 percent pace.
White House press secretary Dana Perino said the numbers demonstrated the
economy's resilience in the face of many challenges. But she added: "No one is
doing a victory dance."
Others agreed that the growth pickup wasn't a sign of better days ahead.
Analysts predict the second quarter will represent the high point for economic
activity this year.
It's "the last hurrah for this economic cycle," said Martin Regalia, chief
economist for the U.S. Chamber of Commerce.
Federal Reserve Chairman Ben Bernanke has warned the economy will be weak
through the rest of 2008. Economists believe growth will slow in the
July-September quarter to a pace of around 1.5 percent, and will turn even
weaker in the fourth quarter. Some, including Regalia, think the economy might
jolt into reverse yet again.
GDP measures the value of all goods and services produced within the U.S. and is
the best barometer of the country's economic health.
The economy is the top concern for Americans. Democratic presidential contender
Barack Obama favors a second government stimulus package, while Republican rival
John McCain supports free trade and other business measures to buttress the
On Wall Street, the GDP report lifted stocks. The Dow Jones industrials were up
more than 180 points at one time.
For months, housing, credit and financial troubles have hammered the economy.
In turn, employers have clamped down on hiring, driving the nation's
unemployment rate up to 5.7 percent in July, a four-year high. The Labor
Department said Thursday the number of people signing up for jobless benefits
declined last week for the third straight period, but remained above 400,000 —
an indicator of a slowing economy.
Health care products maker Abbott Laboratories, telecommunications provider
Embarq Corp., and aluminum maker Alcoa Inc. are among the companies recently
Employers have cut jobs every month this year and wage growth is trailing
inflation. That combination raises concerns about the future of consumer
spending, one of the pillars underpinning the economy.
The biggest factor in the GDP's second-quarter rebound was robust sales of U.S.
exports. The weaker value of the U.S. dollar has bolstered those sales, which
accounted for half of the gain in GDP. Exports grew at a 13.2 percent pace in
the spring, more than double the 5.1 percent growth rate logged in the first
Imports, meanwhile, fell at a 7.6 percent annualized pace in the spring, as
economic troubles in the U.S. crimped demand for foreign-made goods. The
improved trade picture added 3.1 percentage points to second-quarter GDP, the
most since 1980.
Against that backdrop, Japan's Toyota Motor Corp. on Thursday lowered its global
sales target for next year, proof that even one of the world's most durable
automakers is being hurt by a slowing U.S. market.
"With the rest of the world now slowing and the dollar off its lows, the U.S.
will be more reliant on domestic demand in coming quarters," said Nigel Gault,
an economist at Global Insight. "Since consumer spending is slowing down and the
credit crunch is tightening its grip, it is hard to foresee another quarter with
such a robust GDP headline for some time."
U.S. consumers did boost their spending at a 1.7 percent pace in the second
quarter, the best showing in nearly a year. Government stimulus checks of up to
$600 a person helped energize shoppers. But many expect consumers to pull back
in the months ahead as unemployment rises, paychecks shrink and their biggest
asset — their homes — continue to sink in value.
The effects of the housing market's collapse were evident in the GDP report.
Builders cut back at an annual rate of 15.7 percent in the second quarter_
although that was a better showing than early this year and late last year.
Businesses trimmed spending on equipment and software in the spring. And, they
reduced investment in inventories, but not as much as initially estimated by the
government. That also contributed to the improved GDP reading.
One measure of corporate profits showed companies losing ground in the second
quarter. After-tax profits fell 3.8 percent in the spring, compared with a 1.1
percent increase in the first quarter.
With the economy still coping with fallout from housing and credit problems, the
Fed is expected to hold interest rates steady at its next meeting on Sept. 16,
and probably through the rest of this year.
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