by Calculated Risk on 7/30/2011 09:14:00 PM

• I remain confident that Congress will raise the debt ceiling; however the circus in D.C. is clearly impacting the economy. This morning I spoke to a business owner who is negotiating a new lease to expand. His lawyer told him not to sign the lease until the debt ceiling issue is resolved. I believe similar caution has gripped business owners and consumers in many places - and impacting consumer and business confidence.

• Some people have asked why Q2 GDP growth was higher than Q1 GDP growth given the supply chain disruptions hit in Q2. The answer is both quarters were weak, but there was slightly more investment in Q2, less drag from government spending in Q2, and a positive contribution from trade. Inflation was lower in Q2 too, so the adjustment to real GDP was less.

The supply chain disruptions really showed up in Personal Consumption Expenditures (PCE) in Q2. PCE contributed almost nothing to Q2 growth; PCE increased at a 0.1% annualized real rate in Q2, after increasing at an anemic 2.1% in Q1. PCE should bounce back in Q3 - so real GDP growth will probably pick up. Well, if the politicians stop hurting the already fragile economy.

• I'm trying to ignore the debt ceiling nonsense, but it will probably be front page news for the next few days - so it will be difficult to avoid. Ezra Klein at the WaPo is providing excellent coverage, and the Capital Gains and Games blog has some great insights. (I expect Ezra will be working Sunday).

If you think Congress will fail to raise the debt ceiling, I'd suggest Tar and Feather futures!

Earlier:
• Summary for Week ending July 29th
• Schedule for Week of July 31st