What the Q2 08 US GDP Numbers mean

The increase in second quarter GDP was widely expected, but not to the extent of 3.3% .... mainly due to the SOCIALISTIC DOLES ( aka, Stimulus cheques or "tax rebates").
But go beyond just the effect of the Stimulus cheques, and you will see the fluff in the numbers.
1. Major portion of the increased GDP is attributed to increased Exports.... more specifically, the drop of the value of the Greenback... which has dipped from 1.48 to 1.60 over the 2nd qtr... about 7% or so. Today's report in MarketWatch.com corroborates this... the Tech sector is in for a rough ride in earnings, due to the unexpected reversal in the Dolar's fortunes upwards now.. http://www.marketwatch.com/news/story/stronger-dollar-may-take-wind/story.aspx?guid=%7BBF5D0F4E%2D7F4D%2D4853%2D8EC9%2D8AEAFD54BFA0%7D
2. Exports picked up due to drop in Dollar ... a reasonable estimation, but now with the pull back in $$ parity, that edge is now gone...
3. Going forward, the consensus among Economists is that the GDP iss expected to come down , but not crash... the effect of stilumus cheque will wane, plus the appreciation on $$$ value. Add to it, the exacerbating Euro Zone economies, which are falling off the cliff now. In fact the recent sstrength in the Dollar is partially due to increased exportss , but majorly due to drop in Euro Zone prospects. This will continue.
4. A major worry is posssible recession in Japan in this quarter... this will mean slowing down of the Asian Economies... already China is "cooling off" to about 9% growth, and is expected to come down further. India reported 7.9% yesterday, as against an earleir estimate of 8.5%... what is will mean, are two things... short term rally of the Dollar ( wont help the US economy in any way), and slowing exports... this double whammy will result in the GDP slowing down more significantly in Q3 and Q4.
As for recession in the US, the official figures dont suggest a recession alright, but most economists agree wholeheartedly that it already feelss like recession... consumer spending is down over the last 8 quarters, housing is collapsing like a pack of cards, credit is tightening... all these dont bode well.
5. The average American is so stuck with plastic money ( credit Card). There was another report in CNBC last week of a crisis looming in the Credit Card ssegments. Read the articles below... http://www.researchrecap.com/index.php/2008/03/27/warning-signs-seen-in-rising-credit-card-delinquencies/
http://www.domain-b.com/finance/banks/20080813_unsecured_credit.html
To me, the Americans have exhausted all forms of SECURED CREDIT ( Housing, Stocks and Bonds etc.) and are now turning to Credit Cards as a last resort... if this sustains, then one can safely expect to see lesser number of cars zipping on the highways!!

Cheers... Dilip