The bureau of economic analysis released its preliminary GDP numbers today and they looked pretty good.  From their release:

"Real gross domestic product -- the output of goods and services produced by labor and property
located in the United States -- increased at an annual rate of 1.9 percent in the second quarter of 2008
(that is, from the first quarter to the second quarter), according to advance estimates released by the"
Bureau of Economic Analysis. In the first quarter, real GDP increased 0.9 percent."

1.9% growth is pretty darn good.  I dug a bit deeper to see what was causing that growth and here's what I found:

"The increase in real GDP in the second quarter primarily reflected positive contributions from
exports, personal consumption expenditures (PCE), nonresidential structures, federal government
spending, and state and local government spending that were partly offset by negative contributions
from private inventory investment, residential fixed investment, and equipment and software. Imports,
which are a subtraction in the calculation of GDP, decreased."

The growth was attributable to exports, increased consumer spending, and federal government  spending and a reduction in imports.  Makes sense.  With the low dollar, exports had better be booming.  American good and services have never been as competitive.  Increased consumer spending is most likely the result of the government's $168 billion stimulus program (remember those checks you received in the mail?).  Increased government and state spending is what it is.

The biggest movers, exports and government spending.  Exports increased by 9.2% in the second quarter and government spending increased by 6.7%. 

The question is, is this sustainable?  If the dollar stays low than exports can continue to grow.  But it increasingly looks like rates rise in the long-term as the Fed continues to remain wary of inflation.  If that happens, look for export growth to flatten.  Government spending also looks vulnreable.  The country is running a $400 billion deficit and eventually something is going to have to be done to pare it down.  Either spending will be cut or taxes will be raised.  Either one will impact growth.  Certainly the effects of the $168 billion stimulus will be but a distance memory by the time a new President is in office.

What's the final analysis?  We don't seem to be in a recession.  There is growth, but the pillars of that growth remain week and vulnreable.  I expect we'll see growth slow next quarter as the impact of the oil shock is factored into the equation and as the impact of the stimulus checks wear off. 

From an interest rate standpoint, I don't think this data does anything to convince the Fed to either raise or lower rates.