US GDP growth rate is unsustainable; recovery will fade

The US turned in a fairly robust quarter in Q1 2010, with real GDP growth meeting expectations at 3.2% annualized. This comes on the back of a very robust annualized 5.6% growth in the previous quarter. This is the best growth two-quarter growth we have seen since 2003. However, when one digs deeper, it is obvious this growth is unsustainable because it is predicated on a reduction in savings rates and a releveraging of the household sector. As a result, I expect weak GDP growth in the second half of 2010. The problem with the BEA reported numbers is the composition of GDP growth. The BEA says in its data release: Real gross domestic product -- the output of goods and services produced by labor and property located in the United States -- increased at an annual rate of 3.2 percent in...


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