US economy grows 3.3% 2nd quarter

August 28, 2008 1:45 pm

The US Department of Commerce has revised its earlier assessment of US growth in the second quarter of 2008 up from 1.9 % to 3.3 %. This is an important and positive upward revision which suggests that the low interest rates and stimulus package have begun to have a positive effect . This growth follows negative growth in the fourth quarter and anemic 0.9 % growth in the first quarter.A good chunk of the additional growth comes from increased exports which have been facilitated by the lower exchange rate on the US dollar itself a product of the lower interest rates. In addition consumer spending and confidence was boosted by the stimulus package. Consumer spending was up by 1.7 % not historically strong but better than originally projected.Even in   the hard hit manufacturing sector orders for durable goods were stronger than expected although they fell by 2.5 %. If these trends continue into the third quarter then Americans will eventually see a halt to the rise in unemployment although this always comes very last in the recovery phase of the cycle.
One question mark that remains is the sustainable strength of export markets as   economic slowdown has accelerated in Europe(largely because of the excessively tight money policies of the European central bank) and there are mixed prospects in Japan. Also now that
the Olympics have finished in China there is liable to be an accelerator style   slowdown in construction activity there.

There is also still more cleaning up to do in the financial sector but overall prospects appear to be brightening for the American economy for the fall and winter.