Spring slowdown flows into summer

The economic slowdown that began in the spring months has continued into the summer. We estimate that GDP grew at an annualised rate of around 1.5% in the second quarter, down from 1.9% in the first. And the further falls in the ISM activity indices in June suggest that the economy may even grow at a slower rate in the third quarter. But there are few signs that another recession is looming. So while the chances of more policy stimulus from the Fed have increased, a third round of quantitative easing (QE3) is not a done deal.