US economy expands, beats forecasts
Signs of deepening recovery re-emerged Wednesday, according to the US Bureau of Economic Analysis, which released highly-anticipated second quarter GDP figures. Gross domestic product, the value of all goods and services produced in the United States, rose at an annualized rate of 1.7 percent following a 1.1 percent gain the previous quarter. The second quarter gain beat expectations for a 1.2 percent hike after US inventories rose unexpectedly. Job gains, improving home prices and a boost in automobile sales have shored up consumer confidence in the US, which has managed to put the worst of the financial recession behind it.
The GDP figures showed the economy expanded on strong consumer spending and growing enterprise investment in new equipment and construction projects. Combined with the rise in durable goods orders, analysts believe the gains can be sustained throughout the second half of the year. Durable goods orders rose 4.2 percent in June, following a 5 percent rise in May. Consumer consumption, which represents 70 percent of the economy, climbed 1.8 percent, beating the Bloomberg forecast of 1.6 percent. Consumer spending cooled over the previous quarter, when it grew 2.3 percent.
Employment rose by 200,000 in July following a gain of 198,000 the previous month, according to the ADP Research Institute. The numbers topped the Bloomberg consensus, which called for a gain of 180,000. Official nonfarm payroll data will be released by the US Department of Labor Friday, accompanied by the unemployment rate. The government report could show a rise of 185,000 payrolls for July after a 195,000 hike the previous month, according to the Bloomberg consensus. The unemployment rate is expected to drop to 7.5 percent for July.
The benchmark gauges all advanced on Wednesday’s data, before tumbling on Fed woes. The Standard & Poor’s 500 remains poised for its biggest monthly gain in almost two years, closing the New York trade at 1685.73. The Dow Jones Industrial Average was also up more than 0.3 percent before tumbling to 15,499.44. The NASDAQ Composite extended its gains Wednesday, closing at 3,627.14 a gain of 0.27 percent.
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