Friday, July 30, 2010

Today's GDP report

The headline is not encouraging -- growth in 2010:2 was 2.4 percent, well below the 3.7 percent of 2010:1 and the 5 percent at the end of last year.  The NYT writeup is pretty pessimistic for the second half of the year, as concerns mount about Chinese bubbles, Greek defaults, and Washington's phaseout of federal stimulus spending. 

There was some encouraging news: nonresidential fixed investment (mostly buildings and equipment) increased by 17 percent in 2010:2.  This means that businesses think there are growth opportunities in the future.  It also could reflect recent legislative changes:

... you can understand that businesses don’t have to pay health care on equipment and software, and these get better tax treatment than you get for hiring people. If you can get away with upgrading capital spending and deferring hiring for a while, that makes economic sense, especially in this uncertain policy environment.

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