U.S. Exports Brighten Economic Forecast

Revised second quarter economic data reaffirm moderate growth for the remainder of the year, said IHS Global Insight.

Real GDP growth in the second quarter was revised upward from a lackluster 1.7% annual rate to a moderate 2.5% rate. Most of the increase occurred from an improving international trade situation. The revision showed more exports and fewer imports in the second quarter. Corporate profits in the second quarter increased 5.0% from year-ago levels.

“This improved picture of the economy in the second quarter reinforces our forecast of continued moderate economic growth for the remainder of the year with growth accelerating in 2014,” said Doug Handler, Chief U.S. Economist, IHS Global Insight

Threats to this forecast can easily be seen from potentially higher oil prices, political discord in Washington and the impact of higher interest rates on housing and other interest rate-sensitive sectors, added Handler. However, at the beginning of the year, other threats existed from a “fiscal cliff,” a newly imposed government spending sequester, and weakening growth overseas among many of the United States’ key trading partners.

“And yet, economic growth persisted,” noted Handler. “It’s too soon to say how these new threats will pan out, but with a relatively favorable resolution of these issues, the GDP data indicate that this growth can easily occur.”

The second quarter real GDP data show that consumer spending growth remained moderate and sustainable; business investment growth in the quarter was the strongest since early 2012; no discernible inventory overhang exists; and the threat of a drag from a worsening international trade position has been significantly reduced. Pre-tax corporate profits are up 5.0% from year-ago levels.

“The bottom line is that the U.S. economy is currently in a better situation than a year ago to withstand the potential fallout from these threats,” said Handler.

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