US GDP Up On Consumer And Construction Spending
$USO, $UGA
The US economy expanded more than forecast in Q-2, boosted by gains in consumer and construction spending that could help the nation withstand a global slowdown.
GDP rose at a 3.9% annualized rate, compared with a prior estimate of 3.7%, Commerce Department figures showed Friday. The median forecast of 76 economists surveyed called for a 3.7% gain.
Strong hiring, cheaper gasoline and higher home prices could sustain household purchases, which account for about 70% of the US economy. That helps bolster Fed Chairwoman Janet Yellen’s view that the US will overcome any fallout from cooling overseas markets and swings in global financial and commodity markets.
Economists’ forecasts for GDP, the value of all goods and services produced, ranged from 2.7 to 4.1%.
The upward revision was driven by a pickup in consumer spending and business investment in commercial and residential construction.
The economy rebounded last quarter after growing at a 0.6% pace from January through March amid harsh Winter weather, a labor dispute at West Coast ports and a pullback in energy-industry investment after the dive in Crude Oil prices.
The latest estimate is the 3rd for the Quarter and the reading will not be updated again until annual revisions are issued in July 2016.
Business investment rose at a 5.2% annualized pace, compared with a prior estimate of 4.1%. Investment in non-residential structures, including office buildings and factories, rose 6.2% the most in more than a year.
Residential construction increased at a 9.3% rate, up from a previous estimate of 7.8%.
Corporate spending on equipment and software eked out a gain last Quarter, and recent data indicate it could pick up this Quarter.
Although GDP and GDI should match in theory, they can diverge in the short run because they are derived from different sources.
For that reason, the government began issuing a new measure tracking the average of the 2 which showed a 2.3% gainer after a 0.5% advance in Q-1 of this year.
Government spending climbed at a 2.6% pace in the Q, led by the biggest gainer in state and local agency outlays since Y 2001.
The biggest obstacle for the economy this Quarter is the need to reduce bloated inventories. Stockpiles in the 1st 2 Quarters of the year showed the biggest back-to-back gain since records began in Y 1947.
The need to cut stocks is the main reason economists project growth will slow this quarter. GDP is forecast to expand at a 2.4% rate, according to the median forecast of economists surveyed recently.
Policy makers are “monitoring developments abroad, but we do not currently anticipate that the effects of these recent developments on the US economy will prove to be large enough to have a significant effect on the path for policy,” Ms. Yellen said in a speech in Amherst, Massachusetts.
Have a terrific weekend.
HeffX-LTN
Paul Ebeling
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