The Gross Domestic Product (GDP) is a measurement of all goods and services produced in the United States. Each quarter, economists and Washington D.C. measure the GDP comparitive to changes in the growth of the GDP each quarter. These changes are assigned a percentage and reported to the market. Much of the changes consumers see in investments come from these reports. After a dismal standing of only 1.1% growth in the first quarter of 2013, the GDP grew more than double that amount at 2.5% during the second quarter. Initial estimates of a growth of 1.7% was offset by a lower amount of imports into the United States and a higher-than-expeted rate of exports of products.
All eyes are on a September 18th meeting of The Fed to determine if this quarterly growth is expected to continue. The Fed has been buying up “Treasuries” (Treasury bonds) and mortgage-backed securities in order to boost the stagnant economy and keep interest rates low. The plan was always that once the economy was “back on its feet,” the Fed would cut back and eventually stop the bond buying letting capitalism take over to create a normal, healthy market. Since this is the first quarter to show growth since the Recession ended, many fear that scaling back on the bond purchases may be jumping the gun on predicting the resurrection of a healthy market.
Meanwhile, business seem to be pulling out of their hiring freezes, even if it is mostly part-time positions that are being filled. Housing prices are going up, and construction spending grew at an annual rate of 12.9%, in its 4th consecutive quarter of double-digit growth. Interest rates also have climbed slightly, but they are still much lower than they have been over a 10-year period. AND, new home sales reports have shown an increase in new home sales over the past 6 months.
Government spending shrank almost 1% in the second quarter, and state governments spending also went down .5%. However, the US economy overall is showing some signs of life, and this is good news for home buyers and consumers alike.