Wednesday, August 29, 2012

Breaking News ... The 1.7% Economy ... Progressivism Leads to Weakness which Leads to Government Intervention and More Weakness .. and On and On

We need 3% real economic growth to do marginally better than treading water.

We need 4% to get back on track and the jobs back that we've lost.

So what do we get?  1.7% growth in the second quarter of 2012.

U.S. GDP Revised Up Slightly has the details:

"U.S. economic output increased a little more than initially thought in the second quarter, though the overall pace suggests growth will remain sluggish ahead of November's presidential election.

The nation's gross domestic product--the broadest measure of goods and services produced in the U.S.--grew at an annual rate of 1.7% between April and June, the Commerce Department said Wednesday. . . .

The Obama administration has highlighted continued growth out of the depths of a recession that began under a Republican administration. GDP has expanded for 12 consecutive quarters.

Still, unemployment remains above 8% and the economy has slowed from the first quarter's 2.0% and the fourth quarter's 4.1% annual growth rate, complicating Mr. Obama's efforts to win a second term.

While politicians debate appropriate responses to slow growth, officials at the Federal Reserve are weighing another round of stimulus.

In minutes of their latest meeting, released a week ago, officials signaled that they are readying new measures to boost the recovery unless data point to "a substantial and sustainable" pickup in activity.

The Fed's policy makers next meet formally on Sept. 12 and 13. In the meantime, Chairman Ben Bernanke may offer new insight on the central bank's thinking when he speaks Friday at its Jackson Hole, Wyo., conference.

Wednesday's report offered some latitude for the Fed to act. The price index for personal consumer expenditures--the Fed's preferred gauge for inflation--rose a modest 0.7% from the previous quarter. Year-over-year inflation is up 1.7%, below the Fed's 2% target.

Stripping out volatile food and energy, the price index for personal consumer expenditures rose 1.8% from the prior quarter.

The revision to second-quarter GDP figures follows better-than-expected exports, fewer imports and stronger personal consumption. The improved consumer spending, though, partly reflected heavier outlays for services like electricity and natural gas rather than goods.

Government spending has been a drag on the economy--though not as much as initially thought.

Other areas were weaker. Business spending was revised lower on smaller inventories.

Real final sales--GDP less changes in private inventories--increased 2.0% in the second quarter, down from a 2.4% gain in the prior period.

The latest quarter's small overall gain is consistent with the recovery as a whole, which is the second-weakest rebound of the post World War II era.

Summing Up

The economy continues to suck.

That will bring calls from the progressives for more government knows best policies and intervention.

That will make things worse, which in turn will bring more calls from the big government guys for more progressive govwernment intervention. 

That will make things worse.

And so it will go until the progressives no longer rule the roost, whenever that may be.

More government = slower growth = more deficits and debt = more government = slower growth and so on.

Get the picture? Let's hope the rest of our fellow Americans do, too.

Thanks. Bob.

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