Despite the U.S. unemployment rate increasing to 8.3 per cent in July of this year and jobless claims reaching a one month high in mid-August it’s not all bad news for the world super power.
Today revised figures from the Commerce Department have shown that from April through June Gross Domestic Product rose at an annual rate of 1.7 per cent. This figure is 0.2 per cent higher than the initial estimate and has been attributed to an increase in household spending and trade deficit improvement.
80 economists surveyed by Bloomberg also came up with a median estimate of 1.7, with forecasts ranging between 1.2 and 2.2 per cent.
But even though U.S. growth exceeded expectations it is still down on the 2 per cent growth of the first quarter.
One senior economist who predicted the revision correctly was Mark Vitner of Wells Fargo Securities North Carolina. Following the announcement from Washington Vitner stated: ‘We are very much struck in a slow-growth mode. We still don’t see the economy breaking free of this 1.5 percent to 2 percent growth rate. A 1.7 percent pace is the personification of the Fed’s frustration.’
This revision reflects the leading gain in services spending since the close of 2006, with the largest contribution coming from increased utility spending. However the data did showed that company investment in new equipment was at an almost three year low and customer purchasing power had eased.
Another U.S. figure was also revised, but in this case negatively. In the second quarter wages and salaries did not rise by the $56.4 billion reported originally but $56.1 billion.
On a brighter note international trade did not appear dampened by the global slowdown, with demand for U.S. goods holding up for the second quarter. In fact, when the U.S. economy is viewed in comparison with that of the euro-zone it seems positively buoyant and some industry experts have expressed confidence in U.S. strength. Dave Barger for example, president and chief executive officer of JetBlue Airways Corp. was quoted as say that although the economy isn’t currently ‘rip-roaring’ it’s ‘certainly not on its heels […] We’re nowhere close to a recession’.
Despite such claims it seems unlikely that third quarter recovery will be of a similar pace if gasoline prices rise, uncertainty deters business investment and employment gains don’t hasten. After two consecutive quarters of decelerating growth it seems likely that Federal Reserve Chairman Ben S. Bernanke will reiterate the view proposed by his fellow policy makers – unless there are significant signs of expansion strengthening soon more stimulus will be needed.
Whether the Federal Reserve decides to take further action of not, the anxiously awaited fiscal cliff of 600 billion dollars of taxes and cuts will still take place next year.
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