Improving U.S. economy points to possible rate hike in September

Gross domestic product rose by an annualized rate of 2.3 per cent between April and June, the U.S. Commerce Department said Thursday.

OTTAWA -?The U.S. economy picked up speed within the second quarter of 2015, thanks to stronger spending by consumers and an improving picture for that labour and housing markets.

Is Canada still flirting with recession? Friday\’s GDP report will disclose more

We’ll find out just how close the economy actually is to retracing the previous recession of 2008-09 when Statistics Canada reports May GDP tomorrow. Continue reading

Gross domestic product rose by an annualized rate of two.3 percent between April and June, the U.S. Commerce Department said Thursday.


Although the updated Q2 tally arrived below economists\’ forecasts of two.6-per-cent growth, it still provided causes of hope -?especially coming following a revised first-quarter economic reading of 0.6 per cent, up from an initial estimate of a 0.2-per-cent decline.

That is going to be welcoming news for that U.S. Fed, which has been waiting for consistently stronger news on the economy prior to the central bank begins to push up its key rate of interest -?probably in September.

For now, Fed chair Janet Yellen and her policy members could keep their lending level at zero-to-0.25-per-cent, where it\’s been since 2008.

The Fed inside a statement on Wednesday that the economy was expanding \”moderately,\” adding the employment outlook was brightening together with \”additional\” improvement in the housing market.

\”While development in the second quarter came in on the softer side, combined with upward revision to the first quarter, it was still a good news report,\” said senior economist James Marple at TD Economics.


\”Importantly, growth is improving where it matters in private domestic spending, suggesting the American economy is shaking off the global trouble surrounding it,\” he explained.

\”There is nothing in here to alter the equation for the Fed whose focus will remain on the job market. Because the drag from drilling investment fades minimizing gasoline prices start paying dividends in greater consumer spending, economic growth is likely to improve further to above three per cent through the other half of the year.\”

But three-per-cent growth still isn\’t strong growth, particularly when Canadian policymakers happen to be hitching their GDP wishes to a stronger U.S. recovery.

Emanuella Enenajor, United states economist at Bank of America/Merrill Lynch in New York, believes the U.S. will have to grow at a faster pace to significantly benefit Canada.

Five-per-cent U.S. expansion, on the other hand, \”is the kind of thing that will really pull-up Canadian growth.\”

On Friday, Statistics Canada will release GDP numbers for May – providing a powerful barometer around the health of this country\’s economy.

Both the financial institution of Canada and the federal government will be looking for some improvement in economic output, following four straight monthly declines in GDP, having a possible fifth in May. A sixth drop would be seen as falling into recessionary territory the very first time since the 2008-09 downturn.

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