The second quarter has brought an increase in U.S economic growth as consumer spending and housing equalize the trade and energy sector. This could point to a slight growth in interest rates this year.
According to a Reuters economist survey, the U.S government will probably report on Tuesday that the GDP increased to a 2.6% annual rate.
This approximation does manage to raise some eyebrows since the government took measures to improve the seasonal adjustment for some of the GDP sectors, so economists suspect that residual seasonality was left scattered about in the data. What this means is that the first quarter GDP might have been revised as higher than it actually was.
Ryan Sweet, economist at Mood’s Analytics commented on the “temporary struggles” that the economy had to deal with at the start of the year. Sweet thinks that the 2.6 increase is enough to fill the current gaps in the economy. He also mentions that “a decent bounce back” is expected in the following quarter.
Consumer spending seems to be the major factor that boosted the GDP. Accounting for more than 60% of the U.S. economic activity, it is predicted to rise up to 2.9% from the low 2.1% registered at the start of the first quarter. This growth is suspected to be a result of the strengthening labor market. More work means more pay, more pay means more buying.
Millan Mulraine, chief economist at TD Securities New York, gives further advice as to how to encourage this growth:
“The upshift in growth momentum should be sustained during the second half of the year. This will provide the necessary cover for the Fed to raise rates later this year, though the pace of tightening will be ‘gradual.’”
Another two important factors that helped the economy in the second quarter were the housing market and government spending.
The energy sector still represents a massive hole in the economy. With oil-field companies like Schlumberger or Halliburton spending a lot of money, growth still found itself pushed down by the effect of these companies’ spending. Specialists look to the future with a positive attitude, however, for it seems that energy spending might come to an end.
With the implementation of 21 new oil rigs last week, energy firms marked their third ascension within the last 33 weeks. If this trend continues and energy spending goes down we might look up to a better tomorrow than we expected.
Photo Credits wall-street.com