FOUR MORE YEARS!:

Second-Quarter GDP Surprises (Tony Crescenzi, 8/28/08, The Small Business Standard)

The U.S. economy expanded more quickly than expected in the second quarter, growing at a 3.3% pace instead of the 1.9% pace projected in the advance estimate for the quarter released a month ago. Forecasters expected a reading of 2.7%.

The bulk of the surprise was in the inventory data, which subtracted 1.4 percentage points from the headline figure (GDP would otherwise have grown at a 4.7% pace, if not for a drop in inventory investment), instead of the 1.9 percentage points reported in the advance estimate. Obviously, with inventories down and not up during the quarter, the upward revision to inventory investment poses no problems for the economy.

A second factor in the upward revision was a sharp upward revision to net exports, which added 3.1 percentage points to GDP instead of the 2.4% reported in the advance estimate. The increase was roughly as expected. The enormous gain was the most since 1980 and the fourth largest of the past 50 years.

Nice for the short term, but in the longer term how does the currency of the only viable developed country not become so strong that imports swamp exports. Of course, our most significant import is going to be the investments of people whose countries are dying.

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Posted by Orrin Judd at August 28, 2008 10:33 AM