The U.S. GDP grew by 2.3% in the second quarter – this came a bit short of market expectations, which were 2.7%. This growth rate, however, is still much higher than in Q1 when the GDP expanded by only 0.6%. The initial market reaction was still positive for the USD that is currently appreciating against the Euro and Yen. Gold and silver are slightly down, while crude oil is modestly up.
Source: BEA and Bloomberg
A closer look at the GDP report reveals that personal consumption spending has risen by 2.9%, year on year. In Q1 this measure grew by only 1.8%. Federal government spending, however, contracted 1.1%.
When you look at investments: Real nonresidential fixed investment declined by 0.6%, while real residential fixed investment rose by 6.6% — a lower growth rate than in Q1. And real private inventories remained nearly flat with a 0.08% contraction. This means, most of the growth in the second quarter came from consumption and less investment. Even though the general trend of the share of investment from GDP has gone up in the past few years.
So is this report bad? Is it great? It’s close to market estimates. It shows growth mainly in consumption, which is still the main driving force behind the progress of the U.S. economy and the government had little to do with this growth. So all in all, it’s another positive sign for the U.S. economy. But perhaps based on the latest FOMC statement, perhaps it still not good enough to consider raising rates or even aloud to the fact.
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