While questions on the Fed’s next move on interest rates continues to roil financial markets, this past week offered some encouraging news on the overall state of the economy.
Last Thursday, the Commerce Department reported that the economy grew at an annual rate of 4 percent in the second quarter of 2007. This is the best performance in over a year. The Commerce Department reports said that the economy grew at an annual rate of 4 percent in the second quarter compared to 0.6 percent in the first quarter. Improvements in trade and business investment resulted in an upgrading from last month’s advanced estimate of 3.4 percent growth in the second quarter.
Exports rose by 7.6 percent and imports fell by 3.2 percent. As a result, trade contributed 1.4 percentage points to growth last quarter. This marks the best performance from trade in a dozen years. As a result, the trade deficit is now at its lowest level in three years as a share of GDP.
Business investment and trade accounted for two-thirds of economic growth in the second quarter. As a result, despite a double digit decline in housing, the economic expansion remains on track despite turmoil in the mortgage markets.
In a separate report, the Commerce Department also reported that real disposable personal income rose a strong 0.5 percent in July, and personal consumption expenditures increased a solid .03 percent to start off the 3rd quarter…this is the fastest pace in three months. This is a hopeful sign, again, that the overall expansion remains in good shape.
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