The Commerce Department slashed its estimate for U.S. GDP growth in the second quarter from a 2.4 percent annual rate to 1.6 percent, confirming fears that economic growth has slowed to a crawl.
While the numbers were grim, they were expected to have been worse. The growth rate topped calculations by economists who had forecast that the earlier estimate would be almost halved to an annualized rate of 1.4 percent.When the Commerce Department released its initial GDP estimate in July, expectations were for 2.5% growth. Which means that we've got--for the second time in as many days--a "better than expected, but worse than originally expected" economic data release.
The market's response? Remarkably similar to yesterday. An immediate rally after the release, which was unable to push higher and eventually reversed course into a sell-off.
It will be interesting to see how this plays out going forward. Beating downwardly revised expectations no longer appears to be sufficient impetus to move the market higher. What will happen if we start to miss our downwardly revised expectations? How far down will we revise our expectations?
This market is searching desperately for direction, but right now it, like most of us, simply doesn't know what to expect. Until we do know what to expect, we're likely in for a weird, bumpy ride.
[The Washington Post]
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