Stacey Vanek Smith: The Commerce Department reported today GDP inched up 1.3 percent in the second quarter. Gross domestic product measures all the goods and services our country produces. It’s one of the most watched economic indicators. Chris Low is chief economist for FTN Financial. He joins us live. Good morning, Chris.
Chris Low: Good morning, Stacey.
Vanek Smith: So tell us Chris, why was economic growth so disappointing?
Low: Well, the big thing is that consumer spending was really weak in the quarter — it rose just .10 percent — it’s actually worse than that if you peel back the covers a little bit. Consumption fell in every month of the quarter. And the reason primarily — higher gas prices, but also car sales after the Japanese earthquake and tsunami there were shortages of cars and they fell.
Vanek Smith: What about the debt ceiling debate? How is that factoring into this?
Low: Well, I think one of the things they need to be thinking about in Washington as we move forward — it’s not just a government shutdown that’s a possibility if they can’t reach a deal. It’s also the economy that’s at risk. When you barely have any growth at all, any significant blow to consumer confidence could tip us over the edge.
Vanek Smith: Any good news here?
Low: Yeah, I think that the one thing we all can hang on to is that the earliest leading indicators — particularly jobless claims which measures lay-offs — have improved in the beginning of the third quarter. It does look like the economy is going to re-accelerate. Again, as long as they don’t mess things up in Washington.
Vanek Smith: Chris Low is chief economist with FTN financial. Thank you, Chris.
Low: You’re welcome, thank you.
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