U.S Economy Surprisingly Rose 3.7 Percent in 2Q

The U.S. preliminary GDP rose 3.7 percent in the second quarter as businesses ramped up investment, the economy continue to expand on bigger gains in both consumer and business spending while the positive surge in inventories further reaffirm strong economic growth amid the global downturn.

Unemployment claims were better than expected, coming in at 271,000 against the purported 275,000 by analysts. According to economists cheaper fuel costs will most likely continue to drive economic growth in the second half of the year and create favourable business environment but to be sustained exports and the manufacturing sector would have to pick up.

The economy grew at a 0.6 percent pace from January through March, restrained by harsh winter weather, a labor dispute at West Coast ports and a slump in energy-industry investment after oil prices dropped.

Thursday’s report also offered a first look at corporate earnings. Before-tax profits rose 2.4 percent in the second quarter, after dropping 5.8 percent in the prior period. From the same time last year, profits were down 0.5 percent.’

Household consumption, which accounts for almost 70 percent of the economy, grew at a 3.1 percent annualized rate, revised from an initial estimate of 2.9 percent and following a 1.8 percent advance from January through March.

Gains in consumers’ purchasing power cooled last quarter, with disposable income adjusted for inflation rising at a 1.3 percent rate from April through June after a 3.9 percent gain in the first quarter. The saving rate decreased to 4.8 percent from 5.2 percent in the first three months of the year.

Millan Mulraine, a researcher and strategist that works at TD Securities USA LLC in New York, said “The economic going forward has more to do with global markets”.