Thursday, July 31, 2014

GDP Improves 4% in Second Quarter

The winter chill has thawed and the economy has rebounded 4% in the second quarter surpassing the governments expectations by 3%. In a spat of heightened economic activity improvement marks a continued trend of increasing economic gain after one of the nation’s worst recessions. The numbers provide some relief for those worried about the previous quarter’s retraction.

Today’s advance estimate of real GDP is a positive signal that our economy is continuing its steady rebound,” stated U.S. Secretary of Commerce Penny Pritzker. She also highlighted that it is necessary to continue work to ensure the rebound is long lasting. 

The plan is to encourage “more companies to export, increase foreign direct investment in the United States, strengthen regional manufacturing and economic development hubs, ensure workers have the skills to find jobs businesses need to fill, and unleash more of our data, all of which helps businesses grow and create American jobs.”

The numbers are complemented by an increase in retail and food services sales, durable goods orders, wholesale trade, new residential sales, personal income, employment and improvement in exports. Housing construction was down substantially but didn’t seem to be creating significant drag. 

Despite the downturn in new construction the overall factors have been positive. Improved international outlook, higher consumer spending, and slack in the system seems to be tightening. Hopefully it will maintain its momentum into the next few quarters.

The Federal Reserve is also cutting its bond from $25 billion from $35 billion. The program was designed to encourage businesses to spend instead of save. As the economy moves to a cruise control stage there is less need for government interference. 

We have a lot to feel thankful for as we move out of the recession period. Increased economic activity will require additional adaptation and investment by companies. With any luck the parity costs of manufacturing with nations like China may provide additional help with investment stimulus and job creation.

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