Ahead of the Bell: Economy-GDP

The average of real GDP and real GDI, a supplemental measure of USA economic activity that equally weights GDP and GDI, increased 3.0 percent in the second quarter, compared with an increase of 2.0 percent in the first quarter.

With GDP quickening in the second quarter, the economy grew 2.1 percent in the first half of 2017.

The upward revision to consumption reflects spending on wireless-phone services, used cars and electricity and natural gas, according to the report.

Real gross domestic income (GDI) growth for the second quarter came in at 2.9%. Even with the upward revision, the weak start to the year means that growth over the past six months has averaged 2.1%, the same modest pace seen for the recovery that began in mid-2009. The saving rate slipped to 3.7 percent from 3.9 percent in the first quarter.

"The consumer is in the driver's seat in terms of economic growth", said Scott Anderson, chief economist at Bank of the West in San Francisco.

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This morning's report suggests that the USA economy is on a more solid footing than previously thought with growth revised up more than expected - albeit on par with our own call. The second-quarter saving rate was previously reported at 3.8 percent.

Nonresidential fixed investment rose 6.9 per cent, up from an initial estimate of 5.2 per cent. Outlays on intellectual property products, structures and equipment were revised upward. Growth was driven by durable spending that rose 8.9 percent; however, the remaining spending categories also performed better than reported earlier. "Households can not, however, continue to rely on savings indefinitely to fund their consumption", CNBC said.

The higher figure in this revision stemmed largely from stronger consumer and business spending than estimated in the advance release. Under President Barack Obama in 2013 and 2014, quarterly growth occasionally exceeded 3 percent. That was the fastest in almost two years and was an upward revision to the 8.2 percent pace reported last month. Trade added two-tenths of a percentage point to growth.

The acceleration in GDP increases chances that the Federal Reserve would announce the process of reducing its $4.5 trillion balance sheet at its forthcoming meeting in September. Housing was a drag on growth in the last quarter, with investment on homebuilding recording its worst performance in almost seven years.

Residential fixed investment and state and local government spending were both downwardly revised, offsetting a larger second quarter increase. Motor vehicle production rebounded after two straight quarters of declines.

(Copyright © 2015. All Rights Reserved.)
 
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