US 2Q17 GDP Saw Solid Growth: Will It Push Up S&P 500?
US Q2 GDP
The revised US GDP saw stronger growth in 2Q17. According to the US Bureau of Economic Analysis’s estimates, the final US 2Q17 GDP saw an annualized growth rate of 3%, which beat the market (VOO) (IWM) expectations of 2.7%. It was far above the preliminary reading of 2.6%. In 1Q17, the US economy posted an annualized growth rate of 1.2%.
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Components of GDP
Personal consumption expenditure and nonresidential fixed investment played major roles in the second quarter GDP growth. These two components contributed the most to the 2Q17 GDP. Personal consumption expenditure rose nearly 3.3% in 2Q17 and beat the market expectation of a 2.8% improvement. Consumer spending for durable goods rose 8.9% in 2Q17, beating market expectations of a 6.3% rise. Exports were also considerably higher in 2Q17 as compared to 1Q17.
The huge improvement in these components supported growth in 2Q17. However, Warren Buffett recently said in an interview with CNBC, “This doesn’t feel like a 3% GDP economy.” According to Buffett, if the US economy were growing at a real rate of 3.0%, we would see more GDP gain per person.
The S&P 500 Index (SPY) has already shown a strong rally so far this year. However, in the present scenario, the index is tumbling a bit, mainly due to rising geopolitical tension, which is arising from North Korea’s missile tests. If US macroeconomic indicators continue to provide strong figures in the near future, then we might see some more upside in the S&P 500 Index.
In the next part of this series, we’ll analyze the ADP employment report from August 2017.