Commentary

The Economy: Not Dead Yet!

The economy is not dead yet! The Commerce Department reported that the U.S. glowed under the warm light created by 3.3 percent real economic growth in the second quarter. This new reading almost doubles the original tally of 1.9 percent- which provided barely enough wattage to read the fine print on mortgage, credit card and auto loan statements.

According to Marketwatch.com, the jolt to the economy’s vital signs stemmed from robust exports and hefty inventory accumulation. (Uncle Sam’s stimulus package- complements of China and various oil exporting autocracies- helped as well.)

The American economy, once the object of envy and grudging admiration, has been struggling since the fourth quarter of 2007. Real economic growth over the past year reads an anemic, European-style 2.2 percent. This marks a drastic slowdown from the credit-fueled growth in the second and third quarters of last year (the website Data360 has a nice graph of recent GDP activity).

Marketwatch also surveyed practitioners of the dismal science (a.k.a. economists). It seems that they underestimated the strength of the U.S. economy in the second quarter, but they are still very pessimistic about the second half of this year. They expect growth to skid toward 2 percent for the current quarter and to practically vanish as the year comes to a close (a meager 0.3 percent increase is expected for the fourth quarter).

I find that I agree with this dour assessment. The easy money that created the fire to keep American growth sizzling is now a pile of smoldering embers. The banks are not through confessing their misdeeds, consumers are beyond tapped out, and the housing market is limping toward the valley of shame (where it will rent a modest dwelling). The recent rise in the dollar will hit exports in the current quarter and, last but certainly not least, Uncle Sam will not be borrowing money to send his spoiled nieces and nephews to the mall anytime soon.

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