GDP for Second Quarter Revised Lower, Down to 1.6%

Posted Aug 27th 2010 10:00AM by Mark Fightmaster
Filed under: Economic Data, Recession

This morning, the Commerce Department announced that the economy grew at a slower pace than previously thought in the April-to-June period. The gross domestic product grew at a 1.6% rate during the period, revised down from an initial estimate of 2.4%, and far slower than the 3.7% pace in the first quarter. Yet Wall Street actually sighed in relief because investors and economists had expected an even worse number.

Despite the euphoria on the Street over the not-as-bad-as-expected numbers, we are still faced with a stark reality as the economy has lost "significant momentum" lately. In fact, most believe that the third quarter will hold similarly weak growth.

That said, the bulls will point to the fact that this is the fourth straight quarter that the economy has grown. However, the average growth was only 2.9%, which is below the 3% growth needed to keep the unemployment rate from rising.

U.S. equities markets opened higher following the GDP data as investors celebrate the news. We might even end the trading session on a positive note. But let's not forget that we are still stuck with an economy that is not growing enough to sustain jobs, which is how our economy will recover. When that reality hits investors, we could see the market come back to reality a bit. Although I doubt it will be today.

Tags: economic crisis, economic growth, economy, GDP, gross domestic product, inthenews