As the third quarter nears its conclusion, the Bureau of Economic Analysis reported Thursday that revisions to second-quarter data show gross domestic product (GDP) in the U.S. expanded at its quickest pace since the first quarter of 2015 – 3.1% – which, if sustained for the rest of the year, would surpass President Donald Trump’s stated goal of 3.0% growth in 2017.
It is not unusual for the Bureau to issue more than one revision to quarterly GDP figures. At least two revisions are frequently made to GDP, and Thursday’s was the second revision to second-quarter GDP.
“With the booming stock market, positive employment situation and consumer spending on the rise, the economy remains stable and strong,” said Vic Patel of Forex Training Group. “And what’s important to remember here is that the uptick in activity last quarter has been the fastest in over two years.”
The revised figure is a considerable improvement over the first quarter, which logged an anemic 1.2% growth rate, and boosted national GDP in the first half of the year to 2.1%, “but the momentum probably slowed in the third quarter as Hurricanes Harvey and Irma temporarily curbed activity,” reported Reuters.
"Continued steady increases in the GDP, particularly in consumer spending, reflect the beginnings of wage inflation and a consistent strong employment market," observed Fletcher Wimbush of TheHireTalent.com. "Continued demand for labor at an all-time high should continue to fuel this growth. Any effects from recent hurricanes should have a negligible effect on third-quarter GDP numbers. Companies are hiring and competition for labor is improving wages. I expect this to continue to accelerate for some time to come."
Brian Rhonemus of Sanford Rose Associates-Rhonemus Group said the revised GDP “will drive optimism as we head into the fall shopping cycle."
“Our bank and credit union clients in larger metro markets will continue to see favorable results compared to smaller rural markets,” Rhonemus continued. “One of our community bank clients in Northwest Ohio is ‘modestly optimistic’ but cautions they would like to see this trend continue to support more growth.”
John Engle, president of Chicago-area family office merchant bank Almington Capital, said the increase was “a pleasant surprise.”
“That impressive growth rate will probably be clipped somewhat in the third quarter thanks to the hurricanes,” Engle said, “but robust growth across the country seems set to continue.”
“This latest GDP report is positive news for the economy,” said John Boyd Jr., principal of The Boyd Co. Inc., a Princeton, New Jersey-based location company. “It shows the economy continues to be moving in the right direction. Consumer spending numbers as well as business spending numbers are solid – this despite economic activity in large markets like South Florida and Houston stalled after the hurricanes.”
Brian Davis, director of education for SparkRental, was pleased with business investment in nonresidential structures, which grew at a 7% pace.
“That’s welcome good news,” Davis said, “after a weak first quarter.”
But reactions were not uniformly optimistic.
“The U.S. economy seems to be gaining momentum after a six-month slowdown,” observed Alexander Kuptsikevich, analyst for U.K.-based FxPro, “yet these relatively good stats do not seem to be helping the dollar.”
Allen Sykora of Kitco News reported that gold prices were steady after the GDP revision was announced.
“Initial jobless claims rose unexpectedly by 12,000 to 272,00,” Kuptsikevich continued, “while wholesale inventories went up for the fourth month in a row. The growth in commercial stocks may be seen as evidence of overstocking and is likely to cause concerns for investors.”
In the wake of the GDP revision, what does the immediate future hold?
“I expect talk of new tax cuts to provide additional tailwinds for growth as job growth and a booming stock market are already boosting consumer spending,” Boyd said. “I am especially excited about doubling the standard deduction – it is a first step in simplifying the complex and onerous tax code and will put more consumer spending power into the economy."
“On the business side of the ledger,” he continued, “our clients, of course, are looking at that long-awaited corporate tax cut to 20%. Our clients compete globally, and our tax rates have been too high for too long.”
Rhonemus focused on the direction of the economy.
“The economic surge in Detroit, Grand Rapids and Columbus is proof positive we are on the right path to recovery,” he said. “There are commercial and residential construction projects driving incredible results in these Midwestern cities. Our community bank clients are looking to expand in these markets if they are not there already. This makes it difficult to recruit and retain talent in all industries. We are in a candidate-driven economy, where the candidate is the commodity and must be rewarded for top performance.”
