Second Quarter GDP Stays Good

Finance Gourmet on August 28th, 2014

We’ve talked a bit about the economic numbers that came out this summer. In large part this is because the economy is in a transition period. After a seemingly unending drift (upward, but drifting nonetheless), the economy might, MIGHT, finally be sputtering to life. However, economic numbers can be tricky. Earlier this year, the GDP numbers unexpectedly showed a major contraction. Most analysts dismissed this as an abberition due to the harsh weather experienced in the Northeast during the first quarter. At the half way point of the year, the economy looked like it was at least heading in the right direction. When the second quarter numbers came out, they were pretty good, but there was fear that the revisions might not be so pleasant.

Revised Second Quarter GDP

In order to produce numbers for each quarter without a significant delay, economic reports are released based upon preliminary data. It is accepted that these numbers are likely to be revised later as economic figures that aren’t as readily available come in. Typically, the adjustments to numbers like the GDP are relatively small. Big adjustments are unusual and come with lengthy explanations about what went wrong. The final numbers are issued as “revised” data.

This week, the revised numbers for the GDP were released by the Commerce Department. As expected the revisions were not large, however, they were in a up direction. Most economists had expected a small revision downward. So, the good news is that the U.S. economy is still growing. The bad news is that there are concerns this growth is being overly anticipated and that there may be a stock market bubble forming. This is seldom good news. Also, the Federal Reserve is growing increasingly frustrated with a dysfunctional Washington that is not only doing nothing to help the U.S economy, but by both its actions and inactions, possibly actively harming the economy. The Fed can only do so much, and it is, quite frankly out of tools.

The end result is that as long as the natural economic cycle of growth and contraction continues forward without any unexpected bumps, we should eventually be fine. But, increasing instability in the global picture, or even worse, more political posturing and economic chicken from politicians in Washington D.C. could derail the whole thing, and the Fed would have few, if any tools left to help break the fall.

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