With news that the U.S. economy expanded at its "weakest pace since the recession ended" in the second quarter—the fact that House Speaker John Boehner's debt bill is lying in tatters with four days left to default has doubly spooked economic observers. The Commerce Department said Friday that "gross domestic product rose at an annualized seasonally adjusted rate of 1.3 percent in April through June, while first-quarter growth was revised down sharply to a 0.4 percent rate from the earlier estimate of a 1.9 gain." Here's how the markets and economic observers are reacting:
First, why was growth so weak? New York Times economics reporter and the paper's newly named D.C. bureau chief David Leonhardt tweets "Behind bad GDP #: Sharp slowdown of consumer spending, shrinking of govt. Biz spending actually picked up." The Journal reports that "a big reason behind the downward revision in first-quarter growth was that the inventory buildup by companies was less than initially estimated, while outlays by the federal government and consumers were also revised down."
This is bad! The Atlantic's Megan McArdle retweets Ann Arbor blogger Ron Fisher who quipped "the GDP numbers are like hearing about the Hindenburg on the day the 6 mile meteor hits the earth." Justin Woldfers tweets "There's no longer a puzzle about the jobless recovery. Latest GDP data say it was a recovery-less recovery." The Atlantic's Dan Indiviglio finds the revision of the first quarter a bigger concern than the latest lower-than-expected 1.3 percent number: "revisions to prior quarters' GDP darken the bigger picture. The first quarter, in particular, was just a disaster."