- Don’t Get Fooled by the 3.3% GDP

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Don’t Get Fooled by the 3.3% GDP

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Don’t Get Fooled by the 3.3% GDP

Friday, 29 August 2008

By Charles Delvalle
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.

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