US Economic Update – US GDP Q2 2014

GDP bounced back strongly in the June quarter, growing by a 4.0% annualised rate. The improvement was broad based and revisions to recent quarters were also positive. Early indicators for the September quarter are positive. We expect solid growth over the rest of the year.

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  • GDP bounced back strongly in the June quarter, growing by a 4.0% annualised rate. The improvement was broad based and revisions to recent quarters were also positive.
  • Early indicators for the September quarter are positive. We expect solid growth over the rest of the year and into next year. The forecast for 2014 has been revised up to 2.1% (previously 1.6%).
  • QE tapering continuing and we expect the program to end following the Fed’s October meeting. The first hike in the fed fund rate is not expected for a while yet – June quarter 2015 – so monetary policy still accomodative.

After declining at the start of the year, GDP bounced back strongly in the June quarter, growing by a 4.0% annualised rate. While this included a sizeable contribution from stocks, the improvement was broad based with consumption and business and residential investment all strengthening, as did government expenditure, while net exports were less of a drag.

There were also revisions to past GDP estimates. In particular growth over 2011 and 2012 was revised down but 2013 was revised upwards. Moreover, the extent of the fall at the start of 2014 was revised down. While the net result is that the level of GDP in the March quarter is broadly unchanged, the revisions suggest more momentum in the economy over the last year or so than previously thought.

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