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July 31, 2007

Growth Rebounds To Perky 3.4% With Tame Inflation; Consumer Confidence Highest In Six Years

What's worse in Rep. Clyburn's opinion, I wonder? A healthy US economy or a victory in Iraq?

The economy had its best quarter in a year but sluggish consumer activity raised concerns about the second-half of the year.

In the second quarter, U.S. gross domestic product rose at a 3.4% annual rate, the Commerce Department said Friday.

That's a bit faster than the 3.2% forecast by Wall Street and a nice rebound from meager first-quarter growth of just 0.6%.

Gains were driven by growth in exports, higher government spending and improved spending on infrastructure.

But there was more evidence that shoppers are tiring. Consumer spending, by far the most important piece of the economy, rose at a 1.3% rate in the second quarter, down from a 3.7% in the first.


Meanwhile, price pressures continued to ease. The GDP report's core consumer price index rose at a 1.4% rate in the second quarter, a four-year low.

That puts inflation solidly in the Fed's unofficial "comfort zone" of a 1%-2% inflation rate.

The media's relentless poor-mouthing of the economy isn't as effective lately as it has been previously.

onsumer confidence hit a six-year high in July, a widely watched gauge of sentiment showed on Tuesday, as Americans shrugged off falling home prices to focus on a healthy jobs market, instead.

The New York-based Conference Board said that its Consumer Confidence Index, rebounded to 112.6, its highest level since August 2001 when it recorded a 114.0 reading. That compared to a revised 105.3 in June. The July 24 cutoff for the preliminary survey of 5,000 U.S. households was before last week's stock market tumble, however.

"An improvement in business conditions and the job market has lifted consumers' spirits in July," said Lynn Franco, director of The Conference Board Consumer Research Center. "Looking ahead, consumers are more upbeat about short-term economic prospects, mainly the result of a decline in the number of pessimists, not an increase in the number of optimists. This rebound in confidence suggests economic activity may gather a little momentum in the coming months."

The Present Situation index, which measures how shoppers feel now about economic conditions, increased to 139.2 from 129.9 in June. That was the highest level since August 2001's 144.5 reading. The Expectations Index, which measures shoppers' outlook for the next six months, rose to 94.8 from 88.8.

Economists closely monitor confidence since consumer spending accounts for two-thirds of all U.S. economic activity.

I guess that hoped-for recession isn't quite here yet.

Meanwhile, the global economy is doing gangbusters business, so, sadly, no help for Harry Reid from his foreign friends.

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posted by Ace at 02:40 PM

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