Two Reasons Why 3Q U.S. Growth Will Disappoint
Aug 29th, 2008 | By Charles Delvalle | Category: Politics & EconomicsAddison Wiggan and Ian Mathias in Agora Financial’s 5. Min Forecast have already warned readers about the risk of taking yesterday’s 3.3% rise in U.S GDP figures at face value. Here, Charles Delvalle at Investor’s Daily Edge says the government’s economic stimulus checks and a weak dollar made U.S. growth seem more impressive than it really is. Don’t expect 3Q data to be quite so favorable…
More from Charles…
If we’re in a recession, why did second-quarter GDP show a 3.3% climb? Does that mean the recession is over? Not so fast.
There are two big reasons why second quarter GDP moved higher. And these are two reasons that won’t be around so much in the third quarter.
The first reason why GDP moved higher was government intervention. A massive $152 billion stimulus plan hit the market during the second quarter. This boosted consumer spending and helped prop up the GDP. But this was a onetime event. There aren’t anymore stimulus packages planned, which means that consumer spending should drop again.
The second reason why GDP moved higher had to do with faster export sales. With the dollar dropping so much this year, it’s no shock that exports moved higher. This export growth will slow, though. The economies in Japan, Germany, England, and a host of other European and developed nations are shrinking. This will place less demand on US exports and we should see export growth slow.
As you can see the two things propping up GDP growth in the US shouldn’t be a factor during the third quarter.
Growth will still be sluggish to nonexistent and the economy will continue to deal with higher than average inflation.
Source: Don’t Get Fooled by the 3.3% GDP
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Charles Delvalle is a self-taught market-timing professional and value analyst who uses a combination of technical indicators and fundamental research to achieve consistent gains on stocks, commodities and options.
Charles is also a staunch contrarian and takes pride in finding undervalued sectors and discovering great companies on the cheap. He questions government reports and the status quo. In addition to swing trading options, Charles is also Co-Editor of the monthly advisory service - INCOME.
