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JEREMY HOBSON: Now let’s get to this morning’s numbers on economic growth. The government said the U.S. economy only grew at a rate of 2.8 percent last quarter — after originally reporting it grew at 3.2 percent.
Bruce McCain is chief investment strategist at Key Private Bank. He’s with us live from Cleveland. Good morning Bruce.
BRUCE MCCAIN: Good morning.
HOBSON: So 2.8 percent despite all the help from the Fed and from the lingering effects of the stimulus package. Is this the best we can do?
MCCAIN: We think it is quite possible that we don’t see a lot stronger growth as the sluggish recovery we’ve seen so far continues. Even worse, we’re somewhat concerned that with the possibility of sharply rising energy prices, that will complicate household budgets and wear one consumer confidence so personal consumption may not remain as strong as it was in the fourth quarter. And that even worse, some of the rising interest rates we’ve seen in China, the political and economic turmoil in other emerging markets around the world may also limit U.S. export growth going forward in a way that will make it hard exports to drive business spending here the way they have over the course of the last year or so.
HOBSON: And Bruce, does this number, this disappointing number, change the debate at all in Washington about cutting spending and perhaps at the Fed, which is facing criticism for its stimulative efforts?
MCCAIN: Well it certainly fuels the argument that the Fed’s made that we have to focus on the slow growth. But to this point, they’ve had the luxury of focusing solely on the slow growth we’ve seen within the economy, as you see rising energy prices increasingly, they may be forced to deal with the inflationary side of their mandate and particularly for companies that have been hard pressed by rising commodity prices and input prices, you may start to see more sharply rising cost in business and ultimately I think the Fed may find they have more of a stagfilationary problem that they have to conciser than simply the problem of slow growth.
HOBSON: Bruce McCain, chief investment strategist at Key Private Bank.