The GDP number is lower than most expected and even Goldman Sachs who had been predicting rate cuts based on slow economic growth had estimated GDP at 1.7%.
Republicans election chances also depend on how the GDP number is taken. So Henry Paulson and most other economists have come out in support of the economy pointing to consumer spending number that rose 3.3% and which accounts for 70% of GDP and that consumer sentiment increased to 93 or so. But a lot of these estimates are based on the belief that housing slump doesn’t seem to be affecting “reselient” US consumer and then housing slump has seen the worse behind it. They are saying that 4th quarter GDP will rebound but if it falls from this level, we will be bordering on recession. Another spin on GDP number I saw was in an investment newsletter which said that corporates are not dependent on US consumer or US GDP for earnings anymore, as they do business worldwide. It cited McD as an example. Only time will tell.
