It was old news that the economy slowed by more than a little in the first quarter. In fact, it slowed by quite a bit more than initially thought.
The second of three updates on 1Q GDP was released this morning, revealing that growth was only 0.6%. That’s down from the earlier estimate of 1.3%, based on annualized, real rates of expansion. The notion that the economy expanded at a pace that was less than half as fast as the government previously said puts the idea of an interest rate cut back on the table. Or does it?
Nothing’s quite so simple these days with monetary policy in connection with trying to second guess the path of least resistance in the dismal science. Recent economic data has suggested that maybe the economy’s not as weak as some said. For example, last week’s report on April’s new home sales showed a rise of nearly 11% over March, suggesting that the worst of the real estate fallout may be past. Meanwhile, April’s durable goods
update offered mild encouragement after stripping out the volatile aircraft orders. Another bright spot was industrial production for April, which was unambiguously buoyant last month.