Does Better GDP Data Change the Fed?

Zacks

We got a GDP beat dealt into trader’s cards this morning.

The U.S. economy grew at a +2.5% annual rate in the second quarter of 2013 instead of the +1.7% numberr earlier estimates suggested. The economy’s forecasters thought GDP would be revised up +2.2%.  This amounts to a ‘beat’.

The quarter's revised growth rate is now more than double the pace clocked in the prior three months. This increase was due to a stronger trade picture. Trade numbers showed a greater strength in U.S. exports, and a slower increase in U.S. imports.

Companies also restocked inventories faster than previously believed. And U.S. businesses raised structures investment more than previously thought.

Consumer spending --70% of the U.S. economy-- remained unchanged. It showed +1.8% growth. Anything around +2% is ‘muddle-through’ data here. Disposable personal income climbed +3.2% instead of +3.4% as originally reported. More evidence of consistent support for consumer demand.

The government’s spending fell -0.9%, instead of- 0.4%, so the sequester effects went up, and still GDP growth in the second quarter rose.

In another positive sign, revised data showed demand for U.S.-produced goods and services rose at a +1.9% pace in Q2 instead of a +1.3% rate previously estimated. This increase also reflected higher U.S. exports.

In this Q2 report, housing accounted for nearly a fifth of the U.S. economy's growth. However, other more recent data suggested housing investment has fallen off.

This upwardly revised GDP data could make the Fed more confident in their plan to reduce their monthly bond purchases.

My RTI Question: Does the size and timing of the Fed’s taper change due to this report?

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