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New GDP Report Signals Continued Economic Growth

ten dollar billThis morning we received word that the second-quarter Gross Domestic Product numbers were revised upward by the Commerce Department, from 3.7 percent in the prior estimate to 3.9 percent.

It was the third estimate of these numbers; the initial estimate was just 2.3 percent. Consumer spending rose at a healthy pace of 3.6 percent, and most other areas of domestic demand contributed positively to the gain in the quarter, noted Bob Hughes, senior research fellow at the American Institute for Economic Research.

The notable area of weakness, he said, was in business investment in equipment; that segment rose by just 0.3 percent during the quarter. That weakness was confirmed by this week’s durable goods orders, which fell 2.0 percent. Within that, orders for nondefense capital goods excluding aircraft fell 0.2 percent.

On a more positive note, initial claims for unemployment benefits were 264,000 in the latest week, up slightly from the prior week, but still well below the key threshold of 300,000, Hughes said. “Continued gains in the labor market are an important support for the economy,” Hughes said.

The latest monthly results for new and existing home sales this week were mixed, but both segments continue to trend higher, Hughes said. Multi-family housing appears to be the stronger segment compared to single-family homes, Hughes said.

The new round of mixed signals, Hughes said, leads to a familiar conclusion: the U.S. economy is posting moderate growth. The first-quarter’s GDP growth was just 0.6 percent. Otherwise, the second-quarter rate of 3.9 percent looks quite good in isolation, Hughes said.

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