Economic Growth Slows

GDP growth has slowed according to the advanced estimate just released by the BEA.

Real gross domestic product — the output of goods and services produced by labor and property located in the United States — increased at an annual rate of 2.5 percent in the second quarter of 2006, according to advance estimates released by the Bureau of Economic Analysis. In the first quarter, real GDP increased 5.6 percent.

It is only the advanced estimate, and at a later date the numbers will be revised which could move the number higher. Still, for the past 9 quarters GDP growth has been about a percentage point higher.

Update: Looks like Wall Street saw this as good news. Clearly, the thinking is that this slow down in growth might mean that Bernanke and the Fed can slow down the interest rate increases.

Update: This article suggests that firms and consumers are turning more cautious and part of the reason is the $3+/gallon price of gasoline.

But in the second quarter, Americans felt the pinch of $3-a-gallon gasoline prices and higher interest rates.

“This expansion is getting a little frayed around the edges because of consumer exhaustion,” said economist Ken Mayland of ClearView Economics. “Consumers are losing that extra mojo to spend” now that the slowing housing market is making people feel less wealthy, he said.

As to what the Fed might do about inflation there was this,

An inflation gauge closely watched by the Federal Reserve showed that core prices – excluding food and energy – advanced at a 2.9 percent pace in the second quarter – far outside the Fed’s comfort zone. That was up from a 2.1 percent growth rate in the first quarter and marked the highest inflation reading since the third quarter of 1994, when core inflation rose at a 3.2 percent pace.

The inflation reading was taken before the latest run-up in energy prices. Oil prices, which had hit a record high in late April, soared to a new closing high of $77.03 a barrel in the middle of July.

In a separate report mined for inflation clues, the Labor Department said employers’ costs to hire and retain workers climbed 0.9 percent in the second quarter, up from a 0.6 percent advance in the prior quarter.

Given that assessment, Wall Street investors and some economists believe the Fed might take a breather in its two-year-old rate-raising campaign at its next meeting, on Aug. 8.

Some economists, however, continue to predict that rates will be boosted again at the August meeting to ward off rising inflation; after that, they think the Fed may move to the sidelines.

What will happen with regards to interest rates? Anybody’s guess at this point.

FILED UNDER: Economics and Business, , , ,
Steve Verdon
About Steve Verdon
Steve has a B.A. in Economics from the University of California, Los Angeles and attended graduate school at The George Washington University, leaving school shortly before staring work on his dissertation when his first child was born. He works in the energy industry and prior to that worked at the Bureau of Labor Statistics in the Division of Price Index and Number Research. He joined the staff at OTB in November 2004.

Comments

  1. Herb says:

    Has anyone been grocery shopping lately. Have you noticed that bread is higher, milk is higher, vegetables are higher, everything is higher. I call that “Inflation” You may have another fancy name for it but “Prices on everything is higher”

    I wonder why ?

    Could it be that gasoline, that everybody needs, is higher ?

    Yes, gasoline is above $ 3.00 per gallon and Exxon Mobile just poster a 36 % increase in quarterly profits. This is an “All Time High” for quarterly profits for any company in the entire world. ( 10.4 BILLION DOLLARS).

    Yet we see those who “Think ?” this is “Just fine and Dandy”. It is the “Free Market” in action or “Supply and Demand”. in action. But it is at the expense of every hard working American and it is now effecting the US Economy.

    Ask yourself WHY.

    The answer is simple, Because there are a group of “Money Grubbing Derelicts” that want “More” profits, and they don’t give a damn who from or the hardships it causes, either “Our Country of the People”

    If the OIL Company Profits don’t piss you off, then you have to be some sort of an Idiot.

  2. James Joyner says:

    Site testing–please ignore.

    TEST 1 (Dashes): Real gross domestic product � the output of goods and services produced by labor and property located in the United States � increased at an annual rate of 2.5 percent in the second quarter of 2006, according to advance estimates released by the Bureau of Economic Analysis.

    TEST 2 (Quotation marks): Yet we see those who �Think ?� this is �Just fine and Dandy�. It is the �Free Market� in action or �Supply and Demand�

  3. king says:

    More testing:

    Real gross domestic product � the output of goods and services produced by labor and property located in the United States � increased at an annual rate of 2.5 percent in the second quarter of 2006, according to advance estimates released by the Bureau of Economic Analysis. In the first quarter, real GDP increased 5.6 percent.

    But in the second quarter, Americans felt the pinch of $3-a-gallon gasoline prices and higher interest rates.

    �This expansion is getting a little frayed around the edges because of consumer exhaustion,� said economist Ken Mayland of ClearView Economics. �Consumers are losing that extra mojo to spend� now that the slowing housing market is making people feel less wealthy, he said.

  4. king says:

    GDP growth has slowed according to the advanced estimate just released by the BEA.

    Real gross domestic product � the output of goods and services produced by labor and property located in the United States � increased at an annual rate of 2.5 percent in the second quarter of 2006, according to advance estimates released by the Bureau of Economic Analysis. In the first quarter, real GDP increased 5.6 percent.

    It is only the advanced estimate, and at a later date the numbers will be revised which could move the number higher. Still, for the past 9 quarters GDP growth has been about a percentage point higher.

    Update: Looks like Wall Street saw this as good news. Clearly, the thinking is that this slow down in growth might mean that Bernanke and the Fed can slow down the interest rate increases.

    Update: This article suggests that firms and consumers are turning more cautious and part of the reason is the $3+/gallon price of gasoline.

    But in the second quarter, Americans felt the pinch of $3-a-gallon gasoline prices and higher interest rates.

    �This expansion is getting a little frayed around the edges because of consumer exhaustion,� said economist Ken Mayland of ClearView Economics. �Consumers are losing that extra mojo to spend� now that the slowing housing market is making people feel less wealthy, he said.

    As to what the Fed might do about inflation there was this,

    An inflation gauge closely watched by the Federal Reserve showed that core prices – excluding food and energy – advanced at a 2.9 percent pace in the second quarter – far outside the Fed�s comfort zone. That was up from a 2.1 percent growth rate in the first quarter and marked the highest inflation reading since the third quarter of 1994, when core inflation rose at a 3.2 percent pace.

    The inflation reading was taken before the latest run-up in energy prices. Oil prices, which had hit a record high in late April, soared to a new closing high of $77.03 a barrel in the middle of July.

    In a separate report mined for inflation clues, the Labor Department said employers� costs to hire and retain workers climbed 0.9 percent in the second quarter, up from a 0.6 percent advance in the prior quarter.

    Given that assessment, Wall Street investors and some economists believe the Fed might take a breather in its two-year-old rate-raising campaign at its next meeting, on Aug. 8.

    Some economists, however, continue to predict that rates will be boosted again at the August meeting to ward off rising inflation; after that, they think the Fed may move to the sidelines.

    What will happen with regards to interest rates? Anybody�s guess at this point.

  5. king says:

    Real gross domestic product � the output of goods and services produced by labor and property located in the United States � increased at an annual rate of 2.5 percent in the second quarter of 2006, according to advance estimates released by the Bureau of Economic Analysis. In the first quarter, real GDP increased 5.6 percent.

    �This expansion is getting a little frayed around the edges because of consumer exhaustion,� said economist Ken Mayland of ClearView Economics. �Consumers are losing that extra mojo to spend� now that the slowing housing market is making people feel less wealthy, he said.

  6. king says:

    �This expansion is getting a little frayed around the edges because of consumer exhaustion,� said economist Ken Mayland of ClearView Economics. �Consumers are losing that extra mojo to spend� now that the slowing housing market is making people feel less wealthy, he said.

  7. king says:

    Real gross domestic product � the output of goods and services produced by labor and property located in the United States � But in the second quarter, Americans felt the pinch of $3-a-gallon gasoline prices and higher interest rates.

    �This expansion is getting a little frayed around the edges because of consumer exhaustion,� said economist Ken Mayland of ClearView Economics. �Consumers are losing that extra mojo to spend� now that the slowing housing market is making people feel less wealthy, he said.

  8. king says:

    �This expansion is getting a little frayed around the edges because of consumer exhaustion,� said product � the output of goods

  9. king says:

    product � the outpu conomics. �Consumers are losing that extra mojo to spend� n

  10. king says:

    Another test product � the outpu conomics. �Consumers are losing that extra mojo cow to spend� n

  11. king says:

    product � the outpu conomics. �Consumers are losing that extra mojo to spend� nothing nothing nothing