Will US Q2 GDP chal­lenge the 3% growth mark?

Financial Mirror (Cyprus) - - FRONT PAGE -

US Gross Do­mes­tic Prod­uct (GDP) will be re­leased on Thurs­day morn­ing. Bloomberg has the con­sen­sus economist es­ti­mate as a gain of 2.9% for the sec­ond quar­ter, with a range from econ­o­mists of 1.9% to 3.5%. It may seem un­ex­cit­ing with a 2.9% gain ex­pected ver­sus a 3.0% unof­fi­cial tar­get of a nor­mal growth pat­tern, but it would com­pare to the fi­nal first quar­ter GDP read­ing of -0.2%.

Lead­er­ship is ex­pected to come from a re­bound in con­sumer spend­ing, fol­lowed by residential in­vest­ment. In­vestors should not be sur­prised at all when they see weak read­ings around the ex­ports com­po­nent of GDP this week as that pesky US dol­lar strength is mak­ing US ex­ports less and less com­pet­i­tive on a global scale. In fact, ma­jor com­pa­nies keep sig­nal­ing how rev­enue and earn­ings are be­ing eaten up for­eign ex­change.

Mon­day’s re­port of a stronger than ex­pected Durable Goods or­ders might have given some cover for stronger than ex­pected GDP. Un­for­tu­nately, the same amount that the June re­port beat ex­pec­ta­tions by was roughly the same wors­en­ing that the May re­ports were re­vised by. The new or­ders un­der Durable Goods rose 3.4% for the big ticket items, boosted by air­craft or­ders, com­put­ers, mo­tor ve­hi­cles, and in ma­chin­ery and fab­ri­cated met­als.

Each re­port on GDP is meant to act as the cur­rent yard­stick mea­sure­ment for how the over­all econ­omy is grow­ing. It ef­fec­tively cov­ers ev­ery sec­tor of the US econ­omy, but it has a mas­sive ex­po­sure of roughly 70% around con­sumer spend­ing.

GDP re­ports mat­ter, but much of the data has been seen that in­flu­ences those re­ports. The GDP’s first es­ti­mate is also given two re­vi­sions and the so­called Fi­nal GDP re­port is of­ten very dif­fer­ent from the ini­tial view on GDP.

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