US GDP beats expectations

The US economy grew even more than first estimated in the second quarter of 2015.

The second estimate of second-quarter gross domestic product showed the economy expanded at a pace of 3.7%, better than the 2.3% initial estimate and topping expectations.

Expectations were for the report to show US GDP grew by 3.2% in the second quarter of 2015, a big upward revision from the initial reading showing that the economy grew 2.3%.

Personal consumption grew 3.1% in the second quarter, in line with expectations after an initial reading showed a 2.9% uptick.

This initial reading was better than expected and a bright spot in an otherwise lacklustre first reading on economic growth in the second quarter.

The Bureau of Economic Analysis’ release indicated that the second reading of GDP reflected increases in nonresidential fixed investment as well as an increase in inventories. These measures both slightly decreased in the first reading.

All told, the BEA said: “The acceleration in real GDP in the second quarter reflected an upturn in exports, an acceleration in PCE, a deceleration in imports, an upturn in state and local government spending, and an acceleration in nonresidential fixed investment that were partly offset by decelerations in private inventory investment, in federal government spending, and in residential fixed investment.”

Thursday’s report also gave us our first estimate of GDI, or gross domestic income, an alternate way to calculate economic activity in the US. GDI grew 0.6% in the second quarter after coming in markedly better than GDP in the first quarter of this year.

The average of GDP and GDI showed the economy grew 2.1% in the second quarter.

And so while Thursday’s GDP reading is highly backward looking, as it covers the three-month period ended June 30, every piece of data is now closely watched as markets seek to read the tea leaves ahead of a potential rate hike from the Federal Reserve in September.

Ahead of the report, stock futures in the US were rallying after Wednesday saw the stock market have its best day in about four years.

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