Informed Speculation

I’ve been recommending high and low that the Republicans tout the Bush economy for November, but the latest GDP numbers are, if not bad, certainly not as good as expected:

The nation’s economic growth slowed significantly in the second quarter, according to a government report Friday that came in well below Wall Street expectations.

The gross domestic product, the broad measure of the nation’s economic activity, grew at a 2.5 percent annual rate in the three months ended in June, according to the Commerce Department’s initial reading for the period. That’s down from the 5.6 percent growth rate in the first quarter.

Economists surveyed by Briefing.com had forecast growth of 3 percent in the most recent quarter.

The report raised hopes that the Federal Reserve might not be as likely to raise interest rates for the 18th straight time at its next meeting Aug. 8. Chairman Ben Bernanke told Congress earlier this month that a cooling of the economy could act to keep prices in check, lessening the need for further rate hikes.

The GDP report included some closely watched inflation measures. The overall price deflator rose at a 3.3 percent annual rate, up from the 3.1 percent reading in the first quarter, but below forecasts of a 3.4 percent rise.

The so called core PCE reading, which measures prices paid by individuals for items excluding food and energy was up at a 2.9 percent annual rate, up from a 2.1 percent rise in the first quarter, but in line with forecasts.

In a separate report with inflation implications, the Labor Department’s Employment Cost Index rose 0.9 percent, up from a 0.6 percent gain in the first quarter, and slightly higher than the 0.8 percent forecast of economists.

At the risk of being the party-pooper, I think we need at least one more rate hike, to emphasize the Fed’s credibility re:inflation…