US economy bounces back as GDP rises by four per cent

 
Billy Ehrenberg
Follow Billy
US GDP grew at an annualised rate of four per cent in the second quarter (Source: Getty)

It doesn't come much bigger than this for the land of hope and glory: a bond-buying announcement, an interest rate announcement and GDP for quarter two come all in one day for the US - and that day is today.

GDP for the second quarter came in at four per cent, above the three per cent that many were expecting. The figure was called to jump after the -2.9 per cent reverse in the first three months of 2014.

That drop was widely considered to be a result of bad weather rather than a true reflection of the state of the US economy and the rise in the second quarter is equally likely to be partly a reaction to the poor figures seen in quarter one, although the decline is now being revised up: apparently it fell by 2.1 per cent, not 2.9.

All data is from the U.S. department of commerce.

The Financial Times quotes economists at the Royal Bank of Canada as saying:

Q1 was not reality anymore than Q2 is reality. We think once the dust settles, economic growth will settle back into the two per cent zone.

The slight kink caused by the weather seems to be evening out, and normal business resumed.

How good are these numbers though? Four per cent is significantly higher than the three per cent many were expecting but there is still work to do if the economy is to meet the Fed's 2.2 per cent annual projection: 3.5 per cent annualised over the last quarter would do it, but this remains unlikely.

Revisions such as those we've seen with quarter one are very common when governements report GDP, and no number can be taken as concrete, another point economist Justin Wolfers made today.

The data shows that only one quarter since 2010 has remained basically unchanged, and the revisions can be big.

The US economy has recovered faster than ours, despite the recent growth on this side of the Atlantic.

While GDP in the UK has only just recovered from the crisis, meaning the economy is the same size as before the crash, in the US that happened some time ago, as you can tell from the graph above.

The other difference when compared to the UK is that the US also passed its 2007 real GDP per capita peak, back in quarter two 2013.

Related articles