4Q GDP Growth: 0.6% [Update: Fed Makes It a Double]
The economy nearly stalled in the fourth quarter with a growth rate of just 0.6 percent, capping its worst year since 2002.
For all of 2007, the economy grew by just 2.2 percent, the weakest performance in five years, when the country was struggling to recover from the 2001 recession. The housing collapse dealt the economy its biggest blow last year. Builders slashed spending on housing projects by 16.9 percent on an annualized basis, the most in 25 years. The report came as the Democratic-run Congress and the Bush administration continue to work on a program of tax rebates and business incentives aimed at stimulating the economy.
This is just the "advance" report and will be subject to two revisions over the next two months, but there's no getting around the fact that this was an unmitigated bummer of a report. It represents a deceleration of annualized output growth from 4.9% in the third quarter and the drop was somewhat larger than expected (analysts were looking for growth of 1.2%).
Savvy readers will notice 0.6 > 0, meaning the increasingly neurotic we're-already-in-a-recession crowd will have to sit on their hands for at least a few more months. Congress, meanwhile, will undoubtedly interpret the sharp deceleration as validation of their inescapably feckless plan to stimulate us and immediately seek to expand the size of the half-baked package.
Weighing in even more immediately, though, is Ben Bernanke and the FOMC. This afternoon, shortly after 2:00 pm, the Fed will its December policy statement, following the conclusion of its two-day meeting. In the wake of last week's inter-meeting surprise triple cut, investors now expect the committee to follow up with another single or double. I'm hoping for the double, but given the possibility that last week's action may have been prompted by worldwide mini panic (which may in turn have been triggered by Societe Generale dumping out of their rogue trader's not so mini illicit positions), Bernanke may be eager to wipe off whatever egg he may believe to be on his face by withholding that succulent second quarter point.
Then again, today's unexpectedly anemic GDP data might be just enough to convince the FOMC otherwise.
Either way, we ought to see some gorgeously spastic gyrations this afternoon, as the market tries to decide what it thinks of the decision.
Update: Eggy face, be damned - a half-point it is.
The Federal Open Market Committee decided today to lower its target for the federal funds rate 50 basis points to 3 percent.
On top of last week's triple cut, that makes 125 basis of easing in just 8 days. They didn't even cut that fast after 9/11.
What's more, the Fed is signaling that it still has love to give.
Today’s policy action, combined with those taken earlier, should help to promote moderate growth over time and to mitigate the risks to economic activity. However, downside risks to growth remain. The Committee will continue to assess the effects of financial and other developments on economic prospects and will act in a timely manner as needed to address those risks.
The markets aren't complaining, but they aren't precisely bowled over either. After this morning's GDP report, it looks like anything less than this could've touched off some grumpiness.
As is, it looks like we're staging a respectable rally and preparing to go 3 for 3 to the upside, week-to-date.
Update: Or maybe not. That went south in a hurry.
Handcrafted by Flip on January 30, 2008 |
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Tracked on Apr 18, 2008 2:20:07 AM