Economic optimism is rising on the latest data coming out of the US market: the advance estimate of second quarter 2014 GDP growth in the US was 4.0 per cent, well above market expectations for a 3.0 per cent increase, according to an RBC Economics statement by economist Nathan Janzen.
“The advance estimate of US second-quarter 2014 GDP growth was 4.0 per cent, thereby marking a larger than expected rebound (market expectations had been for a 3.0 per cent increase) and following a revised 2.1 per cent decline (was -2.9 per cent) in the first quarter. The improvement in second quarter was broadly based with most expenditure components contributing to the increase. Second-quarter 2014 consumer spending grew by 2.5 per cent, which was up from 1.2 per cent in the first quarter.”
RBC Economic’s report notes that net exports subtracted 0.6 percentage points from GDP growth in the second quarter as rising exports (9.5 per cent) were offset by a larger increase in imports (11.7 per cent); however, even that drag was significantly smaller than the 1.7 percentage point subtraction in the first quarter.
“On a quarterly basis, the previously reported 2.9 per cent drop in the first quarter of 2014 is now estimated at -2.1 per cent while growth in fourth and third quarters of 2013 were revised notably higher to 3.5 per cent and 4.5 per cent from 2.6 per cent and 4.1 per cent, respectively. This leaves a slightly stronger trajectory for growth early in 2014, which along with a stronger than expected second-quarter 2014 advance reading, points to annual GDP growth this year of slightly above 2 per cent relative to our forecast of 1.7 per cent,” notes Janzen.
According to RBC, this rebound reflects temporary factors that hampered growth (e.g. severe winter weather) rather than a true downturn of the “underlying economic backdrop.”
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