US economy bounces back in second quarter

Prosperous data goes hand in hand with possible rise in interest rates by Federal Reserve in September

Photo by: Reuters
Photo by: Reuters

US Consumer Department reported on Thursday an expansion of the gross domestic product (GDP) for the second quarter. The key drivers for the data was a steady advancement of the job market which gave consumers enough confidence go spending and procured a recovery in foreign trade.

Although the economy is strengthening, the data pointed towards room for improvement in the recovery process.

According to the first estimate of second-quarter, GDP rose 2.3 percent, revised up to show it increase at a 0.6 percent rate in the first quarter, from the previously reported 0.2 contraction.

Consumer spending, which accounts for 70 percent of the economy, showed a 2.9 percent growth in the first three months, from 2.1 percent rate at the start of the year. The saving rate on the other hand fell 4.8 percent from 5.2 percent.

Despite the strong dollar, exports of goods shot up, while imports rose slightly. This left a smaller trade deficit which added 0.13 percentage point to the US economy.

For the first time since 2012, business investment (spending on construction, machinery, research and development) fell 0.6 percent from 1.6 percent growth in the first three months. This could mean businesses are still wary, despite an upbeat in consumer spending, job gains and housing market.

Although the central bank signals a rate hike upon strengthening data, there are concerns that higher US policy rates could cause a great amount of market volatility across the globe, in particular the emerging markets.

TRTWorld and agencies