Economy Contracted Late Last Year and Grew Less Than Expected in Q208

Posted by Patrick O'Connor on 7/31/08 12:32 pm

Today’s GDP report revealed the economy was weaker than expected late last year and for the first half of 2008.  The economy fell 0.2% in Q407, a -0.9% downward revision, then climbed 0.9% in Q108, a -0.2% downward revision, and then rose 1.9% in Q208, 0.4% less than expected.

A huge $62.2B drop in inventories subtracted 1.9 percentage points from headline GDP in the second quarter.  Consumption rose only 1.5%, and that was artificially inflated by the tax rebate checks from the government.  Without the stimulus, consumption could have fallen.

Ian Shepherdson at High Frequency Economics said the outlook for Q3 growth looks “grim.”

Adding to the gloom, jobless data for the week ended July 26 showed that claims soared 44,000 to 448,000, its highest level in five years.

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