US and Europe

US Economy – picking up steam?

Tuesday September 10, 2013 Hugh Dixon

The release of three major US economic indicators over the last two weeks, are all pointing to the fact the US economy has been picking up steam since March 2013.  If the US economy can sustain this stronger growth over the coming year than the US economy will be in good shape to sustain strong growth over the coming years.  A strong growing US economy will go a long way in helping the global economy; including New Zealand’s economy to grow at a higher level.

 

The first indicator was the release of the US final figures for GDP growth in the June 2013 quarter.  In the June 2013 quarter real growth had increased to 0.6 percent according to data released on 29th August 2013.  This quarterly increase of 0.6 percent was double the March 2013 quarter’s GDP growth of 0.3 percent.  Annually US real GDP growth for the year to June 2013 was 1.6 percent, up from annual growth of 1.3 percent in March 2013.

 

 


 

This result for the June 2013 quarter was fuelled by strong growth in US exports, combined with positive growth in personal consumption and fixed investment.  Also helping were smaller decreases in Federal and State government consumption compared to the March 2013 quarter.

 

Further cuts to Federal and State government consumption this year have the potential to impact on the US economies GDP growth and may act as a handbrake on GDP growth in the September and December 2013 quarters.

The second indicator released was US manufacturing, also showing positive signs of growth. On 3 September 2013, US manufacturing numbers for the August 2013 month were released by Institute of Supply Management (ISM).

 

The ISM poll of purchasing managers revealed that US manufacturing had grown by the largest amount since June 2011, with 55.7 percent of purchasing managers seeing increased purchasing of manufactured products.

 

 

This is the third month in row the US manufacturing has expanded according to this poll.  Of the 18 industries covered by ISM, 15 reported growth in August 2013.

 

This continued expansion in the US manufacturing is good, combined with stronger growth in US exports is very good for the US economy as this illustrates that both domestic and international consumers are purchasing US made goods in growing numbers.

 

Further expansion of the US manufacturing sector will see more jobs being created in this sector and stronger GDP growth in future quarters.

 

The third indicator released by the United States of America’s (US) Bureau of Labour Statistics (BLS) were data on the US’s employment and unemployment for the August 2013 month.

 

In August 2013, America’s non-farm employment increased by 169,000, after a 162,000 increase in the July 2013 month.  With the 169,000 growth in employments, America’s monthly unemployment rate dropped slightly to 7.3 percent in August 2013, from 7.4 percent in July 2013.  An unemployment rate of 7.3 percent in August 2013 represents a good improvement from one year ago when the unemployment rate was 8.1 percent.