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NAM Economist Upbeat On Recovery

In response to the July 31 advance report on U.S. GDP, David Huether, chief economist of the National Association of Manufacturers (NAM), says a long-awaited rebound in business investment is at last under way. The Commerce Department reported that GDP increased to 2.4% in the second quarter, "a welcome sign that the economy is beginning to recover from the war-related shocks," Huether says. "Economic growth over the previous two quarters averaged just 1.4%. The main contributors to growth in the second quarter included rebounds in consumer and business spending as well as a surge in federal spending, mostly related to war with Iraq." After dropping 4.8% in the first quarter, business investment in equipment and software increased 7.5% last quarter. This reflected a combination of 16.1% growth in information processing equipment and a 5% decline in other equipment -- which declined 24% the first quarter. On the cautious side, Huether says that the 25% surge in federal spending related to the war in Iraq added 1.6 percentage points to GDP growth in the second quarter, "a level unlikely to continue."

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