The US economy grew at its fastest rate for two and a half years in the second quarter after a broad-based pick-up in activity, boosting hopes of a sustained recovery.
The commerce department increased its estimate of GDP growth from an annual rate of 4.2% to 4.6%. It was the best performance from the world’s largest economy since the fourth quarter of 2011, and the upward revision was driven by stronger export growth and business spending than previously estimated.
It was a significant rebound from the 2.1% annual drop in GDP in the first quarter of the year, when extreme weather disrupted the economy. The latest revision was in line with Wall Street’s expectations.
Chris Williamson, chief economist at Markit, said: “The impressive gain in the second quarter looks to be far more than just a weather-related upturn, with evidence pointing to an underlying buoyant pace of economic expansion. Survey data in particular indicate that strong growth has persisted throughout the third quarter.”
He said the strong data would further fuel expectations that the US Federal Reserve might start to raise interest rates sooner than mid-2015, but added it was unlikely at the moment.
“The most likely scenario seems to be that rates are likely to stay on hold until mid-2015, with the Fed tolerating above-trend economic growth to help heal the labour market, but any marked upturns in the inflation outlook could mean the hawks carry a louder voice. Next week’s employment report will therefore be scoured for detail on any signs of wage growth accelerating in particular.”
Consumer spending, which accounts for more than two-thirds of the US economy, increased by 2.5% in the second quarter. Business investment in equipment rose by 11.2%.
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