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May 31, 2007

It's the economy, stupid

U.S. Economic Growth Weakest in Over 4 Years

The government cut in half its estimate of economic growth in the first quarter, reporting the slowest rate of expansion since the end of 2002.

Before today’s numbers were released by the Commerce Department, it was clear the economy was downshifting from the rapid 5.6 percent expansion of the first quarter last year. But the new data reinforced how significant the slowdown has been.

Growth advanced just 0.6 percent, compared with an initial estimate of 1.3 percent. The chief reasons for the revisions were adjustments to the estimates of imports and business inventories. Imports, which subtract from the gross domestic product, were stronger than the government first thought. At the same time, businesses cut production and accumulated smaller inventory stockpiles.

Despite the adjustments to the growth figures, inflation in the first quarter was essentially unrevised. Prices excluding food and energy, a measure preferred by the Federal Reserve, advanced by 2.2 percent in the first quarter, still above what the central bank has said it considers acceptable.

So - the only sector performing well is exports - not surprising since the dollar is worth shit. Inflation - minus food & energy (only the two most important daily needs - gas and cheese burgers!) - was at 2.2 percent! That is 8.8 annually (Mr. and Mrs. hourly worker, can you feel the money shrinking in your wallet?). And growth is almost non-existent - even with all the war spending.

But there were some revisions to the numbers that economists said they found to be encouraging. Consumer spending, the staple of economic growth for the last decade, was revised higher.

No shit - stuff costs more now!

Most economists agree that the first quarter was probably a low point for the last several years, and they expect the economy has regained some strength in the second quarter.

So why doesn't this article use the word "recession"? And why expect recovery in the second quarter?

This is a mess. We are in a recession, people are out of money for the most part, the housing market is going to collapse in most of the country. The last 18 months of this administration are going to be very, very, long.


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