The US economy grew at a faster pace than originally estimated during the second quarter on increased spending from both businesses and consumers. This is an encouraging sign that U.S. expansion is still on track despite a period of poor weather, political uncertainty in Greece, and global growth concerns.
Gross domestic product (GDP), which is the value of all goods and services produced in the economy, expanded at a 3.7% seasonally adjusted annualized rate, exceeding all forecasts by economists of only 2.3% growth.
Gains in US employment, cheaper fuel costs, and rising home prices may continue to support growth in the economy during the final half of this year. However, with a record surge in inventories, this strong growth may be difficult to sustain, since manufacturers are already fighting with the repercussions of a strong dollar on exports to slumping emerging markets.
Thursday’s GDP numbers offer a backward view of the economy, of course, detailing a three-month stretch that ended in June. Concerns about China have since buffeted global markets and introduced greater uncertainty into forecasts for the U.S. economy. But economists and policy makers will examine the latest numbers closely for clues on what factors may be adding to growth in the current quarter.
This 2nd quarter GDP report comes as the FED (Federal Reserve Bank) policy members debate on whether growth is strong enough to merit a hike in the benchmark Fed Funds Rate.
Federal Reserve officials will weigh the latest hard data against volatility in markets ahead of their next official meeting on September 16th and 17th.
Stocks were in positive territory in futures trading following the morning release. The S&P 500, Dow Jones Industrial Average and Nasdaq Composite were each up close to 1% in futures trading shortly after the release. The US Dollar Index also rose on the back of this report.
Marvin Perry has been an active trader within the Forex market since 2010. He attended the University of Illinois in Urbana/Champaign, and graduated in 2002 with a double major in Cell and Structural Biology and Chemistry. He currently serves as an FX instructor & Quantitative Analyst for the Forex Anatomy Private Trading Community called "The Lab", where he conducts live weekly trading webinars & instruction on Fundamental Analysis & Inter-Market Interpretations of dynamic asset classes and their influence on currencies.