July 31, 2013 1:51 pm
US GDP growth beats expectations at 1.7%
The US economy grew at an annualised rate of 1.7 per cent in the second quarter of 2013, as robust consumption and investment offset the drag from public spending cuts and a slowing global economy.
That resilience is likely to encourage the US Federal Reserve to consider reducing its asset purchases from the current pace of $85bn-a-month as early as September.
Consumption added 1.2 percentage points to growth, business investment contributed 0.6 percentage points, and the continued rally in housing was worth 0.4 percentage points on the total.
But the second quarter figures were overshadowed by comprehensive revisions to GDP data that added a larger-than-expected 3.6 per cent to the size of the economy in 2012.
The BEA has started to count research and development as investment, along with copyrights for films and musics, and is also including pension promises by companies as income.
The revisions revealed that the Great Recession was not as deep as previously thought, with the size of the slump in 2009 moderated from -3.1 per cent to -2.8 per cent, and the recovery last year sharply upgraded to growth of 2.8 per cent rather than 2.2 per cent.
Also on Wednesday, the payrolls processor ADP said that the US created 200,000 jobs in July, a stronger-than-expected figure that was its highest since February. Its June figure was also revised higher. The strength of the ADP report was another sign of momentum in the US economy that will raise expectations for the officials jobs report on Friday.
The Fed is meeting today, with a statement expected at 2pm in Washington this afternoon, although little policy action is likely this month.
The US dollar erased earlier losses against the euro and the yen after the news, while stock futures were little changed pending the Fed statement.
Copyright The Financial Times Limited 2013.
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