News Column

US economy bounces back to life with 4% growth spurt

July 31, 2014

By Hugo Duncan, Daily Mail, London

July 31--The United States economy has roared back to life after a dismal start to the year, official figures showed yesterday.

Gross domestic product rose at an annual rate of 4pc in the second quarter of the year – far stronger than the 3pc expected by analysts. On a quarter-by-quarter basis, the economy grew by 1pc, outstripping the 0.8pc expansion seen in the UK between April and June.

The US growth spurt followed an annualised slump of 2.1pc in the first three months of 2014. That was revised up from the 2.9pc drop previously reported.

The figures suggested that the US economy is in far better shape than feared and fuelled speculation that the Federal Reserve will start raising interest rates early next year.

'The economy is looking pretty darned good,' said Stuart Hoffman, chief economist at PNC Financial Services Group in Pittsburgh.

The Fed, America's central bank, trimmed its monthly bond-buying programme by another $10bn last night to $25bn, having reduced it from $85bn since December. It is thought it will end the programme in October – paving the way for interest rates to rise next year if growth remains strong and unemployment continues to fall.

Jobs figures published tomorrow in the crucial non-farm payrolls report will provide further clues to the health of the economy with analysts expecting, around 230,000 jobs to have been created in July.

An even bigger increase would fuel speculation that the Fed could raise interest rates in the US before the Bank of England hikes borrowing costs in the UK.

But Fed chairman Janet Yellen this month said that the central bank planned to leave interest rates low for a 'considerable period'.

Chris Williamson, chief economist at Markit, said: 'It looks like the pace of expansion should start to moderate slightly after the impressive growth spurt seen in the spring, meaning policymakers will be relaxed about not needing to raise interest rates any time soon.'


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Source: Daily Mail (London, England)

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