With inflation hitting a 17-year high (subscription required) and foreign economic growth tanking (subscription req'd) (not to mention another military conflict breaking out), things economic certainly could be better. Of course they could be much, much worse.

The advance estimate for real GDP in the second quarter showed growth of nearly 2 percent.  While hardly impressive, it is likely that this number will be revised up to possibly 3 percent. Manufacturing output increased for the second consecutive month in July and the gains were widespread; closer to home for NEMA, electrical equipment output remains solid.

An impressive rally (subscription required) as of late by the dollar versus the Euro and other major global currencies has had many desirably effects, particularly taking the edge off import price inflation and the dollar hedging benefits of investing in oil and other commodities. Plus, overseas travel just became a little more affordable. Whether the dollar rally puts a dent in export growth, which has been a critical driver of the broader American economy, remains to be seen, but it will be closely watched.

Perhaps one of the lesser-noticed pieces of good news has been the significant retreat in commodity prices. Yes, crude oil spot and futures contracts are still fetching over $110 per barrel, but the pace at which gold, oil and natural gas prices have declined in the last few weeks has been a surprise. Some fear that falling prices will stop the drive towards reducing energy consumption dead in its tracks, but I disagree at least with respect to the near term. American consumers appear to have changed their habits enough that these shifts will stick this time around (see here for another example). If that were not enough, the supply side of the energy equation has already responded. Prices are high enough to encourage exploration and extraction in areas that were considered too expensive just a couple of years ago.


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