It’s official folks: The US economy is back.
On Thursday, we got the latest update on second-quarter GDP from the Atlanta Fed, the economics world’s hottest research team, that showed the second-quarter economic bounce back is fully underway.
The Atlanta Fed’s latest GDPNow tracker — which nailed the disappointing first quarter despite Wall Street’s far higher expectations — is now forecasting the economy grew 1.9% in the second quarter.
And this is still with over a month of data to take in. In short, the economy has bounced back after a slow winter in a big way. (For its part, Wall Street expects the economy grew around 3% in Q2. Unlike the Atlanta Fed, however, these predictions are based on expectations for future data, while the Atlanta Fed’s model uses only data received to this point.)
Thursday’s big revision — up from 1.1% a week ago — follows theretail-sales report for May, which showed sales jumped 1.2% over the prior month.
On Wednesday, we got some big news about wage growth, and last week we got more good news about the labour market.
And so while Wall Street’s predictions of a strong US economy all through 2015 were lampooned after a disappointing winter, things look to be turning around.
All of this, of course, on the background of a Federal Reserve that looks eager to raise interest at some point this year. While the market is currently not expecting the Fed to move until December (if at all), Wall Street economists have sort of coalesced around the Fed’s September meeting as a time to initiate rate hikes.
The market’s expectations for the Fed, however, were not exactly stellar the last time around.
In a note to clients following the Thursday’s retail report, Chris Rupkey at MUFG wrote, “This is the real deal … What are consumers buying? Everything, everything that wasn’t nailed down this month.”
Fed officials can put away their concerns, stop being risk managers, and look forward for once, as this is not an economy that requires the continued support from the central bank nearly a full six years after the recession ended … If the Fed is data-dependent, they should know the retail sales data are perfect when they sit down next week. Yellen said every Fed meeting from now on is a live one. Stay tuned. Rate hikes, liftoff, is coming this summer. Bet on it.
So there it is.
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