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AP: 5.9% GDP Growth Will Likely Fade

From a suddenly downcast Associated Press:

Brisk 5.9 percent growth in Q4 will likely fade

By Jeannine Aversa, AP Economics Writer

February 26, 2010

WASHINGTON – The economy rocketed ahead at a 5.9 percent pace in the final quarter of 2009, stronger than initially estimated. But the growth spurt isn’t expected to carry over into this year.

The fresh reading on the nation’s economic standing, released by the Commerce Department on Friday, was better than the government’s initial estimate a month ago of 5.7 percent growth. It would mark the strongest showing in six years.

Even so, it didn’t change the expectation of much slower economic activity in the current January-to-March quarter.

Roughly two-thirds of last quarter’s growth came from a burst of manufacturing — but not because consumer demand was especially strong. In fact, consumer spending weakened at the end of the year, even more than the government first thought.

Instead, factories were churning out goods for businesses that had let their stockpiles dwindle to save cash. If consumer spending remains lackluster as expected, that burst of manufacturing — and its contribution to economic activity — will fade.

The signs aren’t hopeful. Consumer confidence took an unexpected dive in February. Unemployment stands at 9.7 percent. Home foreclosures are at record highs. And many Americans are still having trouble getting loans.

Forecasters at the National Association for Business Economics predict the economy will expand at only a 3 percent pace in the first quarter of this year. The next two quarters should log similar growth, they predict…

Looking ahead, consumer spending is expected to aid the recovery — not lead it. That’s one reason why the recovery is expected to move forward at only a moderate pace of around 3 percent in coming quarters.

In normal times, such growth would be considered respectable.

Though, of course, never during a Republican administration.

But the nation is emerging from the worst recession since the 1930s. Sizzling growth in the 5 percent range would be needed for an entire year to drive down the unemployment rate, now 9.7 percent, by just 1 percentage point

As government stimulus wanes and Federal Reserve economic-support programs end, the economy — especially the fragile housing market — could suffer. Economists say the odds of the economy sliding back into a recession this year are low, but they won’t rule it out…

If gains from inventories and exports are taken out, the economy last quarter grew at just a 1.6 percent pace.

And, improvements in the housing market also tailed off at the end of last year — despite massive government support.

There’s worry inside and outside the Fed about how housing will fare once a homebuyer tax credit ends in the spring and the Fed stops a mortgage-securities buying program that has lowered mortgage rates and boosted sales.

What’s this? Pessimism — even from Mr. Obama’s most fiercely loyal myrmidons at the Associated Press?

Obviously, the word has gone out that it is now more important to push for yet another stimulus bill than it is to try to talk up the economy.

The Democrats must finally realize they aren’t going to be able to fool anyone outside of their lunatic base about the economy, so they had better build up their already formidable slush fund.

That way they can just buy the votes they need come November.

This article was posted by Steve on Friday, February 26th, 2010. Comments are currently closed.

5 Responses to “AP: 5.9% GDP Growth Will Likely Fade”

  1. proreason says:

    As transcribed by the AP from the perpetual Obamy campaign that finally seems to have realized that it is smarter to set expectations than to brag about the moron’s next magic act.

  2. Mithrandir says:

    “It’s about a 3 letter word! JOBS! J*O*B*S*, JOBS! — Joe Biden.

    (interestingly, whenever Republicans tried to stimulate job growth, you could just hear the Democrats say, “Tax breaks for the rich! Tax breaks for the wealthiest 1%!” When Democrats do it, it’s “stimulus.”)

  3. tranquil.night says:

    “There’s worry inside and outside the Fed about how housing will fare once a homebuyer tax credit ends in the spring and the Fed stops a mortgage-securities buying program that has lowered mortgage rates and boosted sales.”

    Well, what happens when a great deal of artificial buying pressure is suddenly removed from a market?

    The answer is the same thing you see on any brief pullback in an overall strong downtrend: the trend ultimately prevails.

    And right now the trend is strongly understood to be: government paralyzed and on a dangerous financial precipice, the private sector and consumerism completely bunkered down, and an entire 1 year market rally built on a house of cards and probably only surviving currently because of the dollar’s relative strength to the euro.

  4. joeblough says:

    Hmmm… Let’s see.

    We’re piling up debt. We’re printing monopoly money. We’re borrowing money from people who hate us. 1 out of 5 people is either losing pay or is altogether out of work. The rest of the world is making strange eyes at the dollar. Banks are failing. The government is starting to take over private companies. We just lost some uncounted billions in real wealth over the national real estate loan fraud — and that’s on top of a major multi-multi-billion dollar loss resulting from the jihaddi attack on the World Trade Center. The country is being run by socialists who have never had a genuine job.

    Hmmm…

    Prognosis for GDP growth?

    Hmmm…

    Are you freakin’ kidding me?

    Is somebody going to tell me that there is some dumb-ass proven-to fail tin-pot dictator, banana-republic idea that those bastards we have in Washington haven’t brought to bear on this situation?

    Rome meets Zimbabwe!

    Stock up on Vaseline … and brace yourself.

    This is going to hurt.

    • proreason says:

      But Joe, you forgot about the magical ability of free health care.

      Everybody will have 20% more cash in their pockets because that will be free from now on.


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