Lower-Than-Expected GDP Will Be Campaign Issue

By John S. McClenahen One consequence of last Friday's U.S. Commerce Department preliminary report on second-quarter GDP has been to put the economy back into play as a presidential and congressional campaign issue. The department reported that from March through June the U.S. economy grew at a seasonally adjusted annual rate of 3%, below even conservative forecasts for a 3.2% advance and a full percentage point below bullish projections for 4% growth. During the first quarter of 2004, GDP grew at a 4.5% annual rate. Dramatically lower consumer spending was mainly responsible for the second quarter's lower rate of growth. "High energy prices reduced the growth of disposable income and that led to a sharp deceleration of spending," notes Jerry J. Jasinowski, president of the Washington, D.C.-based National Association of Manufacturers. "By contrast, exports and business investment contributed to over 70% of GDP growth in the second quarter. This is particularly good news for manufacturers and one of the reasons why the manufacturing sector has outpaced the overall economy in each of the last three [calendar] quarters." The Commerce Department's second read of second-quarter GDP is slated to be released on Aug. 27.

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