James Pethokoukis

Politics and policy from inside Washington

And after the GDP report ….

October 29, 2009

Some cold water via economist Dean Baker of the liberal Center for Economic and Policy Research:

While the growth shown in this report allows us to pronounce the recession ended, it does not provide much basis for optimism about the future. Consumption spending is virtually certain to shrink in future quarters. The same is true of structure investment and state and local government spending. We are unlikely to get much boost from the trade sector or much further boost from defense spending. The only sector that is likely to be a source of substantial growth in the next year is inventories, as the rundown eventually reaches an endpoint. However, with so much weakness elsewhere in the economy, inventories fluctuations will not turn the economy around.

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