Economic growth picked up by 3.7% in the second quarter. That’s according to The Bureau of Economic Analysis’ second estimate of change in real gross domestic product for April, May and June of this year, released Thursday.
The 3.7% increase in output is up more than a percent from the agency’s advance estimate released last month and a major acceleration from the first quarter when real GDP increased 0.6%.
The strong results are particularly significant right now, as the U.S. equity market continues its bid to rebound from steep price declines earlier in the week. Many investors and financial advisors had been pointing to the underlying strength of the American economy as a reason to not panic. Troy Gayeski, senior portfolio manager at SkyBridge Capital, for example, wrote in a note earlier this week, “While it’s been a tough month, the US economy is too robust and European recovery is too real for this to turn into a sustained bear market.”
NEW YORK, NY – AUGUST 26: Traders work on the floor of the New York Stock Exchange during the afternoon of August 26, 2015 in New York City. The Dow Jones Industrial Average closed nearly 620 points up, erasing some of the losses from earlier in the week. (Photo by Andrew Burton/Getty Images)
Stocks were in positive territory in futures trading following the morning release. The S&P 500, Dow Jones Industrial Average and Nasdaq Composite were each up close to 1% in futures trading shortly after the release.
“Today’s US growth figures were a big fillip to the global economy during an otherwise dismal week,” Mike Jakeman, global analyst for The Economist Intelligence Unit, wrote in a note. “The revisions – which again were larger than the Bureau of Economic Analysis would like – mean that we will push up our growth forecast for the year. They also mean that the Fed can be confident that the economy is in a healthy state when it next meets to consider its first interest rate rise since 2006.”
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The increase compared to BEA’s earlier estimate is due to increases in nonresidential fixed investment and private inventory investment, which were previously thought to have declined in the quarter. The overall increase, over the lackluster first quarter, reflected a pickup in personal consumption expenditures, exports, state and local government spending, nonresidential fixed investment, residential fixed investment and private inventory investment. Conversely, imports, which negatively impact GDP, increased.
The price index for gross domestic purchases — which measures prices paid by U.S. residents — increased 154% in the second quarter, compared to a 1.6% decrease in the first. Excluding food and energy prices, however, the price index increased 1.2% in Q2 and 0.2% in Q1.
The BEA also said profits from current production increased $47.5 billion in the second quarter, compared to a decrease of $123.0 billion in the first.
BEA — a division of the Department of Commerce – will release its third estimate of Q2 GDP on Friday, September 25.
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