US economic growth revised up sharply to 3.7%
The US economy grew by far more than previously thought between April and June, revised figures have shown.
The economy grew by an annualised rates of 3.7%, up from the first estimate of 2.3%. Growth of 0.6% in the first three months of the year was not revised.
The second-quarter revision reflected greater corporate investment than previously estimated.
The growth in the economy overall was due to strong consumer and government spending, and higher exports.
Inventories were also higher than the Commerce Department had initially estimated.
Analysts said the revision would be welcome news to investors that have experienced a tough week on global stock markets, triggered by fears that the Chinese economy is slowing. They had expected the GDP number to be revised up, but not by as much as it was.
‘Less compelling’
“A healthy upwards revision to US GDP should act as a much needed soothing balm for investors after the turbulence of this week,” said Nancy Curtin, chief investment officer at Close Brothers Asset Management.
“Yes, the Chinese slowdown is making its mark on the performance of US manufacturing, and the natural resource sector is still reeling from lower commodity prices. However, today’s figures should underline the resilience of the US economy in light of global headwinds.”
European share indexes responded immediately to the revised number, adding to strong gains made in morning trading.
The revised figures are watched closely by investors looking for clues as to when US interest rates may rise.
Earlier this week, a Federal Reserve official said that, given the stock market turmoil and fears for the Chinese economy, the case for an early rate rise was “less compelling”.
Prior to William Dudley’s intervention, many economists had expected the Fed to raise rates in September.
‘Off the table’
The strong growth shown in the revised GDP figures will encourage some investors that an early rate rise may be back on the table, although next month remains unlikely, analysts said.
“Despite the good GDP numbers that we saw today, September largely seems off the table because of the turmoil that we’ve seen in the past week,” said Scott Brown, chief economist at Raymond James.
Recent data, however, “certainly points to a possibility of a rate hike this year,” he added.
US interest rates have been held at near-zero since the 2008 financial crisis. When they finally do rise, it will be the first interest rate increase in nine years.
Source: BBC – US economic growth revised up sharply to 3.7%
