So today they released a revised GDP growth rate for the Spring quarter that was 1.3%, down from an initial estimate of 1.7%. The revision was blamed mainly on the heat/drought that devastated crop production in the Midwest.
crop devastation was bad news for the world as a whole, but I'm not so
sure it was bad for the narrow interests of the US. We're the world's
largest exporter of staple food commodities, and commodity prices went
up a whole lot as a result of the losses. Further, those higher crop
prices will stick around at least until next year, boosting farm incomes
considerably. So, ironically, the U.S. is probably better off as a
result of a bad harvest. Real GDP doesn't reflect the price benefit of
exports because real GDP holds prices fixed at a baseline level, so it
just measures the physical losses of the crop.
quite unusual, I think, for a downward revision of this magnitude to
actually be a good thing. But let me emphasize again: that's good for
the US, not the world as a whole.
Anyhow, since the
revision really had to do with the weather and not general recovery,
probably only helps the financial position of people living here, and
the revision in job counts was all positive, I'm not surprised the stock
market went up.