U.S. Economic Growth Was Actually Better Than Expected In The 2nd Quarter

US Economic Growth

The American economy actually grew at a better-than-expected 3.9% clip in the second quarter this year, thanks to good news from the construction sector and increased consumer spending.

The Commerce Department’s Bureau of Economic Analysis reported its revised measure of GDP growth, which improved on last month’s estimate of 3.7% thanks to more complete data. It follows the first quarter’s also positive yet far smaller growth rate of 0.6%.

But the BEA also noted that real gross domestic income, which measures firm’s costs of production and the incomes derived, only increased 0.7 percent in the same time frame.

Driving second quarter growth were increases in business investment to 5.2% (from a previously estimated 4.1%), and residential construction to 9.3% (from 7.8%). Consumer spending, meanwhile, was buoyed by an improved labor market and lower energy prices.

Whether this will be sustained into the third quarter is another question. The University of Michigan’s consumer sentiment index fell to 87.2 for September from 91.9 the month before, with expectations for the future dropping as well.

The survey’s chief economist, Richard Curtin, attributed this to a belief by consumers “that global economic trends can directly influence their own job and wage prospects as well as indirectly via financial markets.”

But barring an unexpected turnaround in the overall health of the economy, the strong numbers could further boost the case for an interest rate hike by the end of the year. On Thursday, Federal Reserve Chairwoman Janet Yellen reiterated her belief that such a move would happen, and saying that officials “do not currently anticipate that the effects of these recent [foreign] developments on the U.S. economy will prove to be large enough to have a significant effect on the path for policy.”