The Economist: America's Economy, Low and Slow!

Ir recent data left any doubt, America's Bureau of Economic Analysis (BEA) dispatched it this morning: The American economy slowed sharply in the second quarter, adding to the weakest recovery of the post-war period. The BEA"s advanced estimate of economic growth found that real GDP rose at just 1.5% annual pace in the second three months of the year, down from 2.0% in the first quarter, and a surprisingly strong fourth quarter performance of 4.1%, the fastest three month spurt of the recovery. The advance estimate is subject to two revisions in coming months. Growth slowed across most major categories. Personal consumption grew at a more laggardly pace in the second quarter, relative to the first. Net exports shifted back to a drag on the economy as import growth outpaced exports, and the government remained an economic albatross. The federal government has reduced its contribution to output for all of the past year, and state and local governments have been a drag for 11 consecutive quarters. Investment added more growth than in the first quarter, thanks mostly to shifts in inventories. It was a weak report right the way through, though slightly better than markets expected. Nominal output rose at just a 3.1% annual pace in the second quarter, a very week performance, and down sharply from the 4.2% fourth quarter rate. The report should raise expectations for more Fed Action at its meeting next week, not least since the key prace gauges also showed significant weakness. The year on year change in the implicit price deflator for GDP and the PCE price index both slowed from the first quarter to the second, and came in below 2%. Take disinflation across the quarter, which brought inflation rates below 2%, combine it with weak nominal output performance, and a substantial slowdown in employment growth, and one has to give the Fed dismal marks yet again.