US GDP surprises on the positive side

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Date: Thursday 28 Aug 2008

LONDON (ShareCast) - US Gross Domestic Product grew faster than expected in the second quarter, driven by buoyant exports and the benefits of the government’s tax stimulus package.

US GDP (Gross Domestic Product ) grew by an annualised 3.3% in the second quarter after rising 0.9% in the first quarter.

Last month the Commerce Department forecast a second quarter gain in GDP of just 1.9%, while analysts were expecting a gain of 2.7%.

The trade deficit narrowed to an annualised $376.6bn, thereby adding 3.1 percentage points to GDP growth. The weakness of the US dollar contributed to the rise in exports but a slow-down in the economies of many of the US’s major trading partners means the boost may prove short lived.

The core PCE reading, which measures prices paid by individuals for items excluding food and energy, rose at 2.1%, unchanged from the previous estimate but higher than the Federal Reserve’s target rate.

With food and energy items included, prices rose 4.2%.

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