Housing Slump Slows GDP to 2% Crawl
The U.S. economy expanded by a paltry 2% in Q3, weighed down by the worst decline in home construction since 1991. The GDP figure fell short of economists' expectations of 2.2% growth. Consumer spending grew 2.8% against forecasts of 2.9% while the personal consumption expenditures price index, another spending gauge, was flat with last month at 2.4% and down from Q2's 4%. The GDP price index rose at a 1.9% annual rate versus 1.8% in November and 3.3% in Q2. Last week, the Fed indicated that it has a relatively soft outlook for the economy but considers inflation to be a greater risk than slow growth. The price index for personal-consumption expenditures excluding food and energy, the Fed's preferred inflation gauge, rose 2.2% in Q3, down from 2.7% in Q2. The mid-Atlantic business activity index dropped to -4.3% in December from 5.1% in November, the third month in four it has been negative. Stock prices slipped on the indicators, with the DJIA dropping 42.62 points to end at 12,421.25 and the Nasdaq losing 11.76 to close at 2,415.85. Bond prices perked up in anticipation that a slower economy will mean lower interest rates.
I believe the fed is lowering the interest rates for the next meeting.