Decision ‘08

5.3% GDP Growth And The Ruling Party In Trouble?

The U.S. economy shot forward at an upwardly revised 5.3 percent annual rate in the first quarter, the fastest growth in 2-1/2 years, as companies built up inventories and exports strengthened, a Commerce Department report on Thursday showed.

The first-quarter advance in gross domestic product was more than triple the 1.7 percent annual rate recorded in last year’s fourth quarter, though still slightly below Wall Street economists’ forecasts for a revision to 5.7 percent pace.

Prices remained in check, with the Federal Reserve’s favorite inflation gauge — the personal consumption expenditures price index excluding food and energy — rising at a 2 percent rate versus 2.4 percent in the fourth quarter.

Stock futures and bond prices rose as traders speculated the GDP data were unlikely to add pressure on Fed policy-makers to boost interest rates.

If there is a GOP member running in November who is NOT trumpeting these figures, he or she doesn’t deserve to return. Or, in the James Carville quote that keeps on giving - “It’s the economy, stupid!”…

3 Responses to “5.3% GDP Growth And The Ruling Party In Trouble?”

1 peter Says:
May 25th, 2006 at 4:54 pm
From this week’s Economist, two paragraphs which indicate why economic booms and busts are beyond the control of politicians:

The world has so far shrugged off higher oil prices with the help of two powerful economic forces. The first is the opening up and integration into the world economy of China, India and other emerging economies. This has given the biggest boost to global supply since the industrial revolution. Their cheap labour has cut the cost of goods. The threat that jobs in rich economies could move offshore has helped hold down wages. Although demand from emerging economies has fuelled the surge in oil and commodity prices, the newcomers’ overall effect has been to curb inflation in the rich world.

That, in turn, has magnified the second stimulus. Since the bursting of the dotcom bubble, central banks have pumped out cheap money. In 2003 average short-term interest rates in the G7 economies fell to their lowest in recorded history. Because inflation remained low, the central banks have been slow to mop up the excess liquidity. Cheap money has encouraged households, especially American ones, to borrow and spend lavishly. It is not just house prices that have surged ahead; cheap money has encouraged investors across the world to take bigger risks, creating several smaller bubbles. Together the huge boost to supply (from emerging economies) and the huge boost to demand (from easy money) have offset the burden of higher oil prices, creating the once-impossible combination of robust growth and modest inflation.
2 Mark Says:
May 25th, 2006 at 6:16 pm
You realize you’re chopping at the roots of your ‘great economy under Clinton’ argument, right?

I’ll be the first to admit politicians have little control over the economy - but little is not the same as none…
3 peter Says:
May 25th, 2006 at 8:15 pm
To an extent, yes — however, other things being equal, a federal budget surplus will lead to a better economy than a budget deficit — private industry does not have to compete with the government for capital –