U.S. GDP Expanded by 3.7% in Q2 – And the Market Goes Wild…

So the recent U.S. GDP report (second estimate) came out and showed a higher-than-expected growth rate of 3.7% in Q2 –market expectations were around 3.2% and the pervious estimate was only 2.3%. This was enough to drive back up equities and even oil prices, which have been experiencing a negative market sentiment has pulled up by more than 10% in one day – when was the last time you saw that?!

Does this mean all the concerns over China, the stronger U.S. dollar and supply glut have all taken the back seat to the recent change over the outlook of the U.S. economic progress? We will have to wait and see if the recent rally isn’t a short term thing.

But let’s take a closer look at the GDP for Q2: personal consumption spending has risen by 3.1%, year on year – slightly higher than in the previous estimate.

Investments have also gone up by similar rates in the past quarter: Nonresidential private fixed investment rose by 3.2% and real residential fixed investment by 7.8% — still lower rate than in Q1. And real private inventories also grew in the past quarter. Thus, even though both consumption and investment went higher than in the first estimate, inventories also went up – which puts an asterisk on the recent rise in GDP.

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