Suitably Flip

2nd Quarter Breather More Breathery Than Thought

The final read on 2nd quarter GDP growth was released by the Commerce Department this morning.  At 2.6% year-over-year growth, it fell short of the previous estimate of 2.9%.

Still, this immediately followed the first quarter blowout of 5.6% annual growth.  It's also getting to be old news, as we're just two days from the close of the third quarter.  In the second quarter, we were still in an environment of tightening Fed policy, whereas now we've chalked up two consecutive pauses and the markets are even pricing in the possibility of an ease in interest rates on the near horizon.  What's more, energy costs have pulled way back, with crude oil now 20% below than its summertime peak.

When we get the advance 3rd quarter number, it may indeed show that growth continued at its moderated pace, but I don't buy the forecasts that show sub-3% growth continuing through the 4th quarter as well.  Between the continued strong economic fundamentals and newly improved monetary policy and energy prices, I don't see how we don't resurge, barring unforseen shocks like a strong hurricane, geopolitical flare-ups, etc.

Still, the downward revision was a sufficient bummer to pare back early morning market gains that had the Dow trading above its record closing price.  It remains tantalizingly close to its January 2000 high, at roughly a third of a percent from uncharted territory.

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2nd Quarter Breather More Breathery Than Thought

The final read on 2nd quarter GDP growth was released by the Commerce Department this morning.  At 2.6% year-over-year growth, it fell short of the previous estimate of 2.9%.

Still, this immediately followed the first quarter blowout of 5.6% annual growth.  It's also getting to be old news, as we're just two days from the close of the third quarter.  In the second quarter, we were still in an environment of tightening Fed policy, whereas now we've chalked up two consecutive pauses and the markets are even pricing in the possibility of an ease in interest rates on the near horizon.  What's more, energy costs have pulled way back, with crude oil now 20% below than its summertime peak.

When we get the advance 3rd quarter number, it may indeed show that growth continued at its moderated pace, but I don't buy the forecasts that show sub-3% growth continuing through the 4th quarter as well.  Between the continued strong economic fundamentals and newly improved monetary policy and energy prices, I don't see how we don't resurge, barring unforseen shocks like a strong hurricane, geopolitical flare-ups, etc.

Still, the downward revision was a sufficient bummer to pare back early morning market gains that had the Dow trading above its record closing price.  It remains tantalizingly close to its January 2000 high, at roughly a third of a percent from uncharted territory.