Economic Comment

The flash GDP report showed the economy grew at only a
2.5%AR for Q2, confirming expectations for a slowdown.
Viewed yr/yr, the broad economy grew by about 6.5 - 7.0%.
This compares to yr/yr growth of dollar production of
9.0% and suggests there is inventory in the system
which could be worked off in the current quarter via
reduced production growth schedules. In turn, that may
take some pressure off industrial commodity prices, but,
it will also result in potential earnings shortfalls among
the industrial and commercial service sectors.

The stock market also took heart this week from a weaker
oil price, which reflects growing appreciation of how very
high cover stocks are.

But note that the US is just moving into a seasonally strong
period for commodities and energies, so even though a slowing
industrial sector can weigh on the commodities markets, it
in no wise follows that significant inflation moderation is a
done deal. Click here to see recent April - July lulls in commodities
price action.