The U.S. Bureau of Economic Analysis released 2nd quarter data and it showed better than expected results. While many expected a significant improvement from the dismal 1st quarter, a growth of 4 percent in real GDP was larger than expected. Given their propensity to revise economic data at later dates, we should be cautious in relying on it. For instance, they again revised the economic contraction of last month from 2.9 percent to 2.1 percent. However, this is certainly evidence that the economy has rebounded from a terrible first quarter.
Some of this rise can be attributed to severe weather in the previous quarter where consumers stayed in, but started to make up for lost time by resuming their spending habits. This explained the healthy boost of 2.5 percent between April and June in consumer spending.
Business investment was also healthy. Gross private investment rose by 17 percent with most of the rise occurring with equipment. This is a significant improvement over the last quarter where investment declined by 6.9 percent. These figures are volatile, but we can take comfort that investment spending has risen in five of the last six quarters.
This improvement is consistent with my July 2nd post entitled, “Don’t Worry, Be Cautiously Happy”. The combination of an improving labor picture and rising manufacturing activity are boosting hopes of a more robust recovery. However, we are not out of the woods yet and should be concerned with the various world crises that can hamper U.S. economic growth in the future.