The U.S. Economy is already the largest in the world, but it’s still growing. Exceeding predictions made in the second quarter, the U.S. economy has grown by 3.9 percent according to Reuters who analyzed the recent GDP revision. With the country not having a high leap in economic growth sense June when the U.S. added 280,00 jobs, it’s a surprise that America could accomplish this hike. The question is, what caused the U.S. to go from a flat ground walk to running on an incline?
A rise in construction and an increase in consumer spending it the cause of economic growth in America for the April to June quarter. It’s a large leap, considering that growth was only at 3.7 percent last month. In addition, an increase of hiring, decline in gasoline prices and higher prices on real estate (which accounts for over 70 percent of the American economy) kept the economy climbing.
In the revision, household spending reportedly increased to 3.6 percent from the original reported figure of 3.1 percent. Additionally, car sales in August alone resulted in the highest number of automobile sales in the last decade. Among the growth figures, it was reported that goods and services increased by 5.1 percent which is a 3 percent rise from the projected figures in the first three months of the year. So, what does this all mean for the future of the U.S. economy?
The benefits of 0.2 percent climb it the potential for lower interest rates. Despite the positives of consumer spending and development in the form of construction, economists are still predicting a decline in the third quarter. In fact, many have already noticed a decreased sentiment among consumers and predict that September’s results will show declined consumer spending, excluding wealthy Americans. Economist, Chris Williamson of Markit recently complied with such predictions.
“The survey data point to sustained steady expansion of the U.S. economy at the end of the third quarter, but various warning lights are now flashing brighter, meaning growth may continue to weaken in coming months.”
Specifically, it is believed that investments, particularly in property will drop. Recently, Senior Economists at RBC Capital Markets in New York, Jacob Oubina expressed his expectations of the U.S. Federal Reserve and predictions for the next quarter.
“There are a lot of things to like about the domestic side of the economy for the second half of the year despite all the global malaise. If the domestic economy holds in there, Fed policymakers are going to hike in December.”
[Image via Getty Images/Credit: Thomas Trutschel]