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Print this PageOverall Economy
Updated July 21, 2006. Higher short term interest rates from 17 Fed interest rate hikes since May of 2004 along with large trade deficits (more than $60 billion per month) stemming from higher oil prices will reduce overall inflation-adjusted GDP growth from 5.1% in Quarter 1, 2006 to 2.5% in Quarter 2, 2006. I expect these same negative factors to further weaken GDP growth for Quarters 3 and 4 of 2006. Additionally, higher energy prices will weaken growth over the course of the next two quarters. However, I expect a cheaper 2006 dollar to bring the trade deficit down to more manageable levels, but to be insufficient to push growth significantly higher. U.S. GDP growth for quarter 3 and quarter 4 of 2006 will be 1.9% and 1.2%, respectively.