GDP Revised Down from 2.9% to 2.6%

The Q2 (April-June) GDP was revised downwards a hefty amount. I like it.
- The 2.6% is still a healthy growth rate for an economy of our size
- An even lower GDP gives the Fed breathing room with interest rates

The Fed is obviously playing a waiting game wherein they hope the slowing economy will ease inflationary pressures and thereby remove the need to raise interest rates. Raising interest rates is always tricky because the impact is delayed and the Fed has a history of overshooting and causing more damage. This time, all looks good.

However, considering that inflation came in at 2.7% and GDP was 2.6%, that means real growth was slightly negative. Not really a cause for concern but it is indicative of a slowing economy. I think that inflation will come in much lower this quarter (July-Sept) because already prices of housing construction materials are dropping fast (lumber, steel, and so forth) and gas has dropped 20% - although this is not part of the core PPI/CPI.
- From the standpoint of inflation triggering interest rate hikes, this is not high enough to cause action.
- In terms of context, this is almost the same growth that we had in Q4 of last year. Remove Q1 of this year, and our growth has been steady.
- Corporate profits are being eroded. This is the key area of focus for me. I fully expect a lot of disappointing earnings surprises this quarter.

Behind the revised numbers, some key elements worth noting are:
1. Consumer spending was not changed. It clocked in at a healthy 2.6%, down a bit from the 4.8% of the Q1 period.
2. Business investment was revised up. It was still down 1.4%, but as we saw from Oracle's earnings release a few weeks ago, businesses are still buying software