No double dipping

Slower growth in the second quarter doesn’t presage a return to recession, according to this report from Kiplinger Associate Editor Jerome Idaszak.

He says growth will firm up in the third quarter, with the national GDP will reach 3% in 2010 and 3.5% in 2011.

“True, that’s subpar for a recovery period, but it’s much improved over the 2.6% decline in 2009,” Idaszak noted. “The Commerce Department’s first estimate of second quarter GDP pegs growth during the period at an annual rate of 2.4%. That follows an annualized increase of 3.7% in the first quarter and 5% in the fourth quarter of 2009.”

The recent slowdown was caused by a several factors, including a phase out of “generous tax incentives” to buy homes and energy-efficient appliances and concerns about the European financial crisis pulling the world into a global recession.

“Fears about a cascade of failures infecting global markets now seem to be easing,” Idaszak said.

Idaszak listed several reasons for his economic optimism. They include:
• Rock-bottom interest rates and a fiscal policy that is still stimulative;

• Businesses will increasingly utilize the pile of cash they’ve been hoarding, spending more on equipment, software and information technology;

• The likelihood that lenders will loosen their grip on capital, allowing credit to flow more freely;

• Rising consumer spending as more jobs are created; and,

• A housing sector that is mending, though at a slow and uneven pace.