Thought Theater

Economy Slows: Inflation Worries Rise genre: Econ-Recon

The economy has slowed in the second quarter raising fears that there may be pressure to increase prices. Despite repeated assertions by the current administration that the economy is doing well; most Americans have not experienced the benefits of the recent economic growth...a fact that may have implications for Republicans during the November midterm election. The New York Times has the full article here.

Gross domestic product, the sum of the nation’s output of goods and services, grew at an annual rate of 2.5 percent in the three months ended June 30, the Commerce Department reported today. While that is considered a healthy growth rate, it is well below the figure of 3 percent that many economists forecast.

Just how rapidly the economy is growing is closely watched by the Federal Reserve and, in turn, by investors, who will price the stock market accordingly. Slowing growth would seem to give the Fed a reason to stop raising interest rates — something many investors would like to see.

One closely watched broad measure of inflation, known as the core index of personal consumption, rose at a 2.9 percent annual rate in the second quarter, the fastest pace reported since 1994. The index rose at a 2.1 percent annual rate in the first quarter.