Edmond, Oklahoma —
Well they finally did it – raised the debt ceiling. Now everything is cool again and we can all go back to enjoying life and watching the economic recovery unfold. Well, maybe not.
While everyone was focused on the political circus in Washington and our self-inflicted shot in the foot, it seems that the stock market went back to focusing on things that matter - like a slowing U.S. and global economy and sovereign debt issues that just won’t go away.
When it was announced that a “deal” on debt reduction and the debt ceiling had been reached, the stock market exploded about 150 points to the upside. Unfortunately, the euphoria lasted about an hour before people realized that the underlying economy continued to deteriorate, and the stock market has been mostly in free-fall since.
While the world was fixated on the debt ceiling debate, first and second quarter GDP figures were released on July 29th and they were not pretty. First quarter GDP had previously been reported at a disappointing 1.9 percent when most economists were looking for something over 3 percent.
Remarkably, the market just yawned and nobody seemed to care. Economists started to revise second quarter GDP estimates down to 2.7 percent.
Second quarter GDP actually came in at a shocking 1.3 percent. At this stage of an economic recovery we should be growing at close to 4 percent. But even worse than that, the first quarter GDP figure was revised down from 1.9 percent to a snail pace .4 percent. On top of that, fourth quarter 2011 GDP figures were revised down from 3.1 percent to only 2.35 percent.
This is shocking and quite worrisome. All the money in stimulus and quantitative easing that has been thrown at the economy and that’s it? Almost two years after the recession “officially” ended, the economy has still not recovered back to pre-recession levels.