• GDP grew by 3.5% qoq (annualised rate) in the September quarter, a strong above trend result.
• While we expect that growth may slow in the December quarter, it should still be consistent with around 3% annualised growth in the second half of 2014. This is more than sufficient to maintain the improvement in the U.S. labour market.
• We continue to forecast growth of 2.2% in 2014 and 3.0% in 2015.

GDP grew by 3.5% qoq (annualised rate) in the September quarter, a strong above trend result. Growth was reasonably broad based with consumption, housing and business investment, net exports and government spending all contributing to growth; only inventories detracted from growth. While the relatively strong boost from government and net exports may be difficult to sustain, this is counterbalanced by less risk of a large inventory correction in the next quarter.

Consumption growth was only a modest 0.4% qoq in the September quarter. June quarter growth was boosted by the rebound in goods consumption following the weather affected first quarter so some slowdown was to be expected. Services consumption continues to be sluggish, although in the last two quarters this has been partly due to a weather related fall in utility consumption. The household savings rate has now risen in each of the last three quarters (from 4.4% in the December quarter 2013 to 5.5% in the September quarter) so, despite strong gains in household wealth and a gradual pick-up in confidence, households are continuing to show a degree of caution in their spending decisions.

For further analysis download the full report.

• US Economic Update – US GDP Q2 2014 (PDF, 70KB )