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August 27, 2010
'Summer of Recovery' Update: 2nd Quarter GDP Revised Down To 1.6%
Topics: Political News and commentariesThe pathetic second quarter Gross Domestic Product numbers that looked bad enough a month ago, look even more pathetic after this morning's announced its stunning revision:
Economic statistics released Friday offered the clearest sign yet that the recovery, already acknowledged to be sauntering, had slowed to a crawl.As Samuel Staley suggests over at the Corner, the best thing the federal government can do is revert to a stable, predictable, and consistent monetary policy (remember the Taylor Rule?), hold the line on government spending, and get out of the way of businesses that are focused on innovation and job creation:The government lowered its estimate of economic growth in the second quarter to an annual rate of 1.6 percent, after originally reporting last month that growth in the three-month period was 2.4 percent.
The revision is a significant slowdown from the annual rate of 3.7 percent in the first quarter and 5 percent in the last three months of 2009.
The news came at the end of a week that showed the economic retrenchment that began in the second quarter has spilled over into the summer. Existing home sales in July were down to their lowest level in a decade, and sales of new homes that month were at their lowest level since the government began tracking such data in 1963. Orders for large factory goods, excluding the volatile transportation sector, dropped in July, indicating that recovery in the manufacturing sector is also stalling.
With such grim reports, economists are now concerned that the outlook for job creation, which has been spluttering all summer, could deteriorate further. Companies and consumers tend to be spooked by bad news, and market analysts and economists worry that faltering confidence could cause employers to hold back on hiring.
Ultimately, the U.S. economy needs a major supply-side adjustment to bring investment in line with real consumer demand, not the smoke-and-mirrors kind promoted by federal largesse. The commercial real-estate market needs to sort itself out before meaningful, growth-inducing lending can occur, but with the economy in such disarray, many banks still don't know how to value the real-estate assets on their books.Unfortunately, the problem is that government will never get out of the way of businesses that are focused on innovation and job creation as long as Barack Obama is in the WH and Democrats are in control of Congress - meaning that we're likely indeed headed for a lost decade unless voters begin to change the situation in the midterms.It hasn't helped that government pump-priming through distortionary policies such as Cash for Clunkers, home-ownership tax credits, and other programs geared toward propping up any and all types of government spending (no matter how poorly targeted) have made it virtually impossible for businesses to know what consumers really want and value. Fortunately, the government is just about out of gimmicks. Now, perhaps, the supply side of the economy can finally get to the ugly task of righting itself.
In the meanwhile, we can only hope that Barack Obama will step away from his ideology long enough to borrow a page from Germany's successful fiscal restraint (polar opposite of Obamanomics) that's experiencing a sizzling rate of growth. Notice that I said "only hope," since like most Americans, I realize that he's far too much a narcissistic, socialist, ideologue to every admit his policies and agenda are wrong for America.
Posted by Abdul at August 27, 2010 10:47 AM
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