U.S. GDP Growth Estimates Boosted on Strong Economic Data

A number of economic studies show renewed strength in the American economy, helping the Federal Reserve boost its estimates for growth.  The Atlanta Federal Reserve’s real-time GDP estimator, GDPNow, has raised its estimates for growth to 2.9%, an increase of 16% from the last estimate. That is the highest growth estimate in over a year.

The boost is being driven by renewed business investment in the United States, which rose from a negative reading to 0.4% thanks to a Census study of durable manufacturing goods.

A number of economic studies show renewed strength in the American economy, helping the Federal Reserve boost its estimates for growth.  The Atlanta Federal Reserve’s real-time GDP estimator, GDPNow, has raised its estimates for growth to 2.9%, an increase of 16% from the last estimate. That is the highest growth estimate in over a year.

The boost is being driven by renewed business investment in the United States, which rose from a negative reading to 0.4% thanks to a Census study of durable manufacturing goods.

That study soared past estimates, showing a 3.4% increase in durable goods orders in April, versus a previous reading of 1.9% and expectations of a decline to 0.5%. The orders were being driven by private investment; excluding defense, new durable goods orders growth was higher at 3.7%.

One of the biggest purchases by companies was transportation equipment, which saw an 8.9% increase to $87.1 billion in April. This is the fourth consecutive month of transportation purchase increases.

Consumer Strength

In addition to strength in business investment, American consumers are getting a boost, according to data about employment and housing.

The United States Department of Labor reported jobless claims fell to 268,000, far below expectations of 275,000 and less than the 278,000 claims in the prior study.  Jobless claims have remained below 300,000 for over five years, the longest streak of such low claims since 1973.

Investment banks released bullish notes on the data, advising customers that weak unemployment would bolster consumer spending and cause another boost to GDP growth and public company revenues. Some analysts noted that lower unemployment would cause wage growth to accelerate, after wages rose strongly in the first quarter of 2016. The stock market ended the day flat on the news.

In addition to a stronger job market, a separate study on real estate showed higher activity and strong home sale prices in a market that is increasingly turning to sellers’ favor. The National Association of Realtors (NAR) reported that pending home sales rose 5.1% in April. Meanwhile, pending home sales are at their highest point since 2006, before the housing crisis began and at the peak of the housing bubble.

NAR Chief Economist Lawrence Yun noted the data suggests Americans are coping with higher home prices, possibly a result of rising rents making home purchasing more affordable. “The ability to sign a contract on a home is slightly exceeding expectations this spring even with the affordability stresses and inventory squeezes affecting buyers in a number of markets,” he said.

Yun added that strength in the job market and low mortgage rates may be factors in the housing market’s strength.