I’m no expert, but … Regarding commodity prices : The GDP often quoted is real GDP, accounting for inflation. So when GDP is reported to be 1% it is growth above inflation estimates. I suppose commodity prices can influence GDP by industries that produce or mine commodities having a larger output. However, raw material production is a relatively small part of our service-oriented economy. Even manufacturing is smaller than the service economy. So, soaring commodity prices most likely reduce real GDP growth in the US.
Current defense spending is based on the budget passed for FY08 which started in October 2007. I believe that there is a seasonal increase in defense spending in the july-September quarter due to fiscal year end targets. This is independent of the election cycle. Any election cycle dependency would have to have been put in place last September. In either case that would impact the current quarter more so than the 2nd quarter which was just reported.
