A Little Bit Softer Now
The Commerce Department issued its final third quarter GDP report today, scaling back its previous growth estimate for the quarter from 2.2% to 2.0%. Economists thought they'd reaffirm the 2.2% estimate.
It's worth noting though that the previous estimate of the negative effect of the housing slump on GDP was 1.0%. That's now been revised to 1.2%, fully accounting for the downward surprise in the growth number. That's not to say the housing slowdown is irrelevant, but it does mean that a lot of the declining growth is symptomatic of the overjuiced housing market coming back to earth, rather than reflecting the broader dynamics of the economy.
Slowing growth at this point is okay. The key is for the economy, with a little help from the Fed, to pull off the much discussed "soft landing", wherein inflation is warded off without our slipping into recession. In my view, that continues to look like the most likely case.
Handcrafted by Flip on December 21, 2006 |
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