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Investing Specialists

The Slow March Forward Continues

The real underlying inflation-adjusted growth rate in the economy appears to be anemic but steady.

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Investors continued to focus on the Greek crisis this week, basically ignoring a flood of economic and earnings news that was on balance quite positive. I remain convinced that Greece, by itself, will not bring down the world economic system.  However, all the dithering and protests may be emblematic of what could happen in other countries facing budget crises.

The Slow March Forward Continues
While I was out over the past six weeks I was surprised that not much had changed either relative to the Greek situation or the general economy, despite incredible volatility in the stock market. Overall GDP numbers for the third quarter were a lot better than most had expected back in mid-September.  A lot of the commentary seemed to use words like, "a strong rebound off of weak data earlier." No way. The real U.S GDP growth rate was neither as weak as the 0.4% and the 1.3% of the first two quarters of the year indicated, nor as strong as the 2.5% in the third quarter (and the odds favor another upward revision) and a potentially strong fourth quarter will suggest. Auto-supply-chain- and weather-related issues and sky-high gas prices all artificially reduced first-half numbers and are inflating second-half statistics. The real underlying inflation-adjusted growth rate in the economy appears to be an anemic but steady 1.75%-2.25%.

Robert Johnson, CFA does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.