Positive Revisions Show GDP Growth Through Second Quarter in US

And now for some good news: the US economy grew faster than originally analyzed in the second quarter of the year, with upward revisions on consumer spending and investment data and downward revisions on imports helping to push overall gross domestic product expansion at an honorable 3 percent.

The last time the US economy grew at such rate in a single quarter, it was the first quarter of 2015. More importantly, perhaps, the 3 percent jump from April to June is more than double the expansion from the period before (ending in March).

E-Trade vice president of investment strategy, Mike Loewengart comments, “The revised GDP growth rate likely comes as a sigh of relief for folks looking for further confirmation that the U.S. economy is moving along swiftly. For investors, today’s numbers punctuate a wild week of market events after a brief summer lull.”

Looking more closely at the numbers, personal consumption expenditures—a significant portion of the economy’s quarterly movement—improved 3.3 percent, which is the biggest such gain since the middle of last year. At the same time, though, exports have been revised down by about 0.4 percent while imports have updated have made up for those losses (and then some), revised to 0.5 percent.

Perhaps the best news: nonresidential fixed investments showed the biggest revision of any of the major US economic expansion components. This measurement, regarded often as a proxy for company expenditures on equipment and technology, has bumped up nearly 2 percentage points. Also, intellectual property investments grew by 3.5 percentage points over initial estimates.

Economic expansion also depends on various investments, and nonresidential fixed investments have shown slow growth, if at all, and that is not a good thing for American payrolls. With more productive employees, companies are making more money without having to have employees work extra hours. More profits (on fewer hours) means more money can be directly re-invested into raising productivity.

Plante Moran Financial Advisors chief investment officer Jim Baird notes: “In the immediate aftermath of the presidential election in November, business confidence soared, and surveys indicated a much greater willingness of businesses to ramp up capital spending budgets. While President Trump has been challenged in pushing forward his economic agenda, surging business investment is a positive sign and provides a private sector vote of confidence in the economic outlook.”

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