Economic growth picked up in the second quarter as tax rebates energized consumers. The rebound followed a treacherous patch where the economy jolted into reverse at the end of 2007.
The Commerce Department reported Thursday that gross domestic product, or GDP, increased at an annual rate of 1.9 percent in the April-to-June period. That marked an improvement over the feeble 0.9 percent growth logged in the first quarter of this year and an outright contraction in the economy during the final quarter of last year.
Still, the second-quarter rebound wasn't as robust as economists had hoped; they were forecasting growth to clock in at a 2.4 percent pace. The rebound, while welcome, isn't likely to be seen as a signal that the fragile economy is out of the woods. There are fears that as the bracing tonic of the tax rebates fades, the economy could be in for another rough patch later this year.
There is a lot to analyze in these numbers. First, I have never worried much about what so called experts predict the numbers to be. They are so expert that they rarely actually get the number right.
That said, while 1.9% growth in GDP can seem positive, there is still a lot to be concerned about. If it was driven mainly by the stimulus checks, that is unsustained growth. Normally, you are always looking for growth to be in the neighborhood of 3% quarterly. Given the weakness in the economy, that was of course impossible. Still, this growth is rather mild. If it was driven mainly by the stimulus checks it is temporary. As such, the numbers for the third quarter will be even more important. Stay tuned.