Friday, June 25, 2010

U.S. GDP Revised Down and Bernanke Talks More QE: Honeymoon and Lies Are Over

It seems that the economic honeymoon, as previously reported by all the "good news" in the media, will be over soon.

US GDP in Q1, which had been published as 3.0% annual growth has now been revised down to 2.7 % annual rate. The disappointing numbers reflect a smaller gain in consumer spending and a bigger trade gap.

According to Bloomberg, the "revised figures showed an economy that was more dependent on inventory restocking and less driven by demand from consumers and businesses before the European debt crisis intensified. Unemployment, combined with the turmoil in financial markets and a lack of inflation, are among reasons Federal Reserve policy makers this week reiterated a pledge to keep interest rates low".

"GDP was forecast to grow at a 3 percent annual pace, according to the median estimate of 79 economists surveyed. Projections ranged from gains of 2.4 percent to 3.6 percent. The world’s largest economy expanded at a 5.6 percent pace in the last three months of 2009.
Today’s GDP report is the third for the quarter. The advance estimate for second-quarter growth is due July 30, when the Commerce Department will also issue its annual revision to growth figures covering the past three years".

"Consumer spending, which accounts for about 70 percent of the economy, rose at a 3 percent pace last quarter, compared with the 3.5 percent the government estimated last month and a 1.6 percent gain in the prior three months. The first-quarter increase was the biggest since 2007.
The revision reflected smaller increases in spending on services than previously thought".

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