The markets have stabilized for now. One thing is certain: It has more to do with the pause in America’s march to yet another Middle East war than today’s revision in gross domestic product. The Commerce Department said today that GDP grew at 2.5 percent in the second quarter, as opposed to the 1.7 percent originally reported. The initial number always seemed fishy since we were supposed to see the new ways of measuring national output, the broadest change in history, to reflect such things as intellectual property. That didn’t mean the economy would necessarily be doing better (“lies, damned lies and statistics”). And indeed, even at 2.5 percent, growth is below its historic norms.
This is likely as good as it gets this year. The Syria crisis is far from over. As it resumes, oil markets will be roiled and the economy, which is already held back by the new normal of higher energy prices, will start bumping against the ceiling of a potential spike in the cost of petroleum. Most of Asia is slowing down and nations such as India are facing big trouble as hot money pulls out and redeploys into investments in advanced nations. The federal sequester will become more of a drag on the economy. Things will get really “interesting” if the GOP forces a debt-ceiling showdown and threatens to push the nation into default. Meanwhile, 2.5 percent growth is too slow to do much to improve the job market. What it will do is increase pressure on the Federal Reserve to start backing off its bond buying, yet another worry in the markets worldwide.
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Today’s Econ Haiku:
Bertha’s going slow
Reclaiming the waterfront
Has us in a hole