U.S. economic growth in the second quarter was revised higher on Wednesday, to 1.7 per cent from 1.5 per cent, at an annualized pace. That’s still awfully sluggish and hardly provides a reason for stocks to rally.
Indeed, the S&P 500 was down about 2 points in mid-morning trading, to 1407. Yet, economists could see a few positive things in the details of the report, including the fact that inventories were revised downward and final sales were revised up to 2 per cent from just 1.2 per cent previously.
Here are thoughts from several economists.
Avery Shenfeld, CIBC World Markets: “The lower level of inventories going into the quarter adds explanation to why Q3 looks headed for a better-than-2 per cent pace.”
Nathan Janzen, Royal Bank of Canada: “Continued growth in domestic demand along with the prospect of some near-term strengthening in inventory growth from the downwardly revised Q2 pace suggests, if anything, some modest upside risk to our forecast that GDP growth strengthened to a 2.0 per cent rate in Q3.”
James Marple, Toronto Dominion Bank: “Economic growth is unlikely to accelerate until consumers and businesses are more confident that the economy will be better tomorrow than it is today. This is the real tragedy of the fiscal cliff. Not only does it threaten to pull the economy into recession next year, it is weakening the recovery right now by pulling down business and consumer confidence.”
Krishen Rangasamy, National Bank Financial: “The upward revision to GDP may have been expected, but the details of the report were better than thought. Final sales weren’t as bad as in the first estimate, and the drag from inventories in Q2 is a positive for Q3 production, although another sub-2 per cent GDP print is in the cards for the latter quarter based on the monthly reports to date.”