September 1, 2016

The Economic Situation, September 2016

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The US Economy: Still in Low Gear

Europe has a bad case of the slows. Mexico’s economy has hit the skids. The UK post-Brexit economy is still trying to get up on its legs. And in the United States, the consumer is keeping the merry-go-round spinning. While some politicians claim all is well in the homeland and others say everything is either rigged or falling apart, the truth seems to lie somewhere in between. As September rolls around, the US autumn economy is chugging along, but at a pitifully slow rate.

The latest GDP reckoning from the Department of Commerce tells the tale, at least for now. Second quarter growth was 1.1%, which followed the first quarter’s 0.8%, giving an average of less than 1.0% for the year’s first half. The accompanying chart produced using the St. Louis Fed’s Federal Reserve Economic Data (FRED) shows the southbound trend continues. At this pace, we will be lucky to see the year close out with 1.4% growth. In order to hit that target, the last six months will have to be a lot better. And that is what the Atlanta Fed’s GDPNow promises. As of August 26, the 3Q2016 estimate was 3.4%. However, the longer-term prospects are not all that bright.

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