Bullish GDP numbers should encourage US investors

By Colin Twiggs
July 28, 2017 2:30 p.m. EDT (12:30 a.m. AEST)

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The Bureau of Economic Analysis (BEA) reports that real gross domestic product (real GDP) increased at an annual rate of 4.1 percent in the second quarter of 2018. This is an advance estimate, based on incomplete data and is subject to further revision.

While the spurt in quarterly growth is encouraging, I find annualized quarterly figures misleading and prefer to stick to the annual rate of change, from the same quarter in the preceding year. Annual growth still reflects an improving economy but came in at 2.8 percent, more in line with the estimate of actual hours worked on the chart below.

Personal consumption figures tend to decline ahead of a recession, so an up-tick in all three consumption measures is a positive sign for the US economy. Expenditures on durable goods is especially robust, suggesting growing consumer confidence. Non-durable goods expenditures are holding up, while services, which had been declining since a large spike in 2015, are maintaining at still strong levels.

There is no sign of the US economy slowing. Continued growth and positive earnings results should encourage investors.

Nobility of spirit has more to do with simplicity than ostentation, wisdom rather than wealth, commitment rather than ambition.

~ Italian conductor, Riccardo Muti (born 1941)

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Colin Twiggs is director of The Patient Investor Pty Ltd, an Authorised Representative (no. 1256439) of MoneySherpa Pty Limited which holds Australian Financial Services Licence No. 451289.

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