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Investing Specialists

Don't Be Fooled by the GDP Report: The Economy Is Gaining Strength

While it seems like GDP is on a roller coaster, the underlying strength in the economy is pretty clear if you look carefully enough.

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As I warned in my last column, there was indeed economic news for both the bulls and the bears to feast on this week. On the surface, the negative GDP growth report was a disaster. The GDP growth rate shocked everyone with a 0.1% decline--although closer examination suggests that government bill payers and overly cautious businesses were largely to blame for an otherwise excellent report. 

In housing news, falling pending home sales and increasing Case-Shiller Price Index readings were part and parcel of the same issue: not enough inventory of homes, new or used. In fact, the new biggest threat to my economic forecast is that there aren't enough land, materials, or labor to truly step up housing starts.

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