"GDP report largely reinforced what we already knew: the economy rebounded in the second quarter on stronger consumer spending, stronger business investment, and a pickup in investment at the state and local government level.'
- Plante Moran Financial Advisors
The growth of the US economy in the second quarter of this year was notably quicker than markets had previously anticipated, the second upward revision in a row showed on Friday. According to the Commerce Department, the US gross domestic product rose at a 3.9% annual pace in the three months from April to June, up from a 3.7% advance reported last month, whereas experts forecasted the reading to stay unchanged. In the meantime, consumer spending, which accounts for more than two thirds of the US economic activity, was revised up to a 3.6% growth pace from the 3.1% rate reported in August, helped by cheap gasoline prices and relatively higher house prices, which boosted households' wealth.
In the meantime, the recent data supports the case that the US economy may be gaining enough strength to withstand an increase of key interest rates from record low levels. Moreover, the Fed Chair Janet Yellen kept the door open to the hike this year in her speech on Thursday, as long as inflation remains stable and growth is strong enough to support employment. However, market participants are somewhat concerned that recent headwinds from China's slowdown could dampen the outlook for the further economic expansion of the world's biggest economy.
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