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GDP Numbers Show Drop, But Better Than Expected

Friday, August 27, 2010

U.S. economic growth slowed in the second quarter of this year as the government revised downwards the gross domestic product (GDP) to 1.6 percent from a previous estimate of 2.4 percent. The news caps a week of bad news about the nation’s economy, in particular, reports that housing sales fell to record lows in July.

Economists had expected the GDP to be lowered in the period from April to June and today’s number was actually slightly better than expected. The drop was due to in part to a surge in imports in June that reached levels not seen since October 2008. In addition, businesses reduced spending on rebuilding their inventory of products to sell as consumer spending slowed.

So with today’s numbers slightly better than expectations, investors’ attention now turns to Federal Reserve Chairman Ben Bernanke. He speaks later this morning before a group of central bankers, economists and policy makers from around the world at an annual banking summit in Jackson Hole, Wyoming.

Fed watchers want a clearer picture of how Bernanke views the economy and what the Federal Reserve can, and more importantly, will do to prevent an economic “double dip.” Many economists want to hear that the Fed will do whatever is necessary to keep economic growth from dropping below zero.

What is next? Today’s report is the second of three reports on economic growth. The third and final report will be released on September 30, 2010.

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