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Instant View: U.S. second quarter GDP rises 1.7 percent

Posted by Joseph Trevisani on Jul 31, 2013 11:02:00 AM

NEW YORK (Reuters) - U.S. economic growth unexpectedly accelerated in the second quarter, laying a firmer foundation for the rest of the year that could bring the Federal Reserve a step closer to cutting back its monetary stimulus.

Gross domestic product grew at a 1.7 percent annual rate, the Commerce Department said on Wednesday, stepping up from the first-quarter's downwardly revised 1.1 percent expansion pace.

Economists polled by Reuters had forecast the economy growing at a 1.0 percent pace after a previously reported 1.8 percent advance in the first three months of the year.

U.S. private employers added 200,000 jobs in July, topping economists' expectations in an encouraging sign for the labor market recovery, a report by a payrolls processor showed on Wednesday.

Economists surveyed by Reuters had forecast the ADP National Employment Report would show a gain of 180,000 jobs. June's private payrolls were revised up to an increase of 198,000 from the previously reported 188,000.

COMMENTS:

PETER CARDILLO, CHIEF MARKET ECONOMIST, ROCKWELL GLOBAL CAPITAL, NEW YORK:

"This is a pleasant surprise and obviously the economic activity in Q2 subject to revision but still a surprise.

"This obviously will increase the debate as to whether or not the Fed will begin trimming sometime in September as opposed to the end of the year or the beginning of the first quarter of 2014. The debate is going to be in favor of those thinking of the September pullback."

JOSEPH TREVISANI, CHIEF MARKET STRATEGIST, WORLDWIDEMARKETS, WOODCLIFF LAKE, NEW JERSEY:

"Economic growth in the second quarter was better than predicted but largely negated by revision to the first quarter, though neither is the Fed's main concern. Third quarter data already shows modest improvement in growth and job creation, that is the important arena for monetary policy and the dollar."

ON ADP DATA:

BORIS SCHLOSSBERG, MANAGING DIRECTOR, BK ASSET MANAGEMENT, NEW YORK:

"It's a good number, but the market is still waiting for Friday's NFP number. But ADP clearly confirms the US job engine is operating on all cylinders, slanting the odds toward, or at least putting the pressure on the Fed to taper sooner rather than later.

"I think the conventional wisdom, though, is that the Fed would still prefer not to commit to anything and make the decision in September, when they have two full employment releases under their belt. For now, though, this may reverse the tide on dollar/yen, which has been under selling pressure."

SCOTT BROWN, CHIEF ECONOMIST, RAYMOND JAMES, ST. PETERSBURG, FLORIDA:

"You might see a bit of an increase in expectations for Friday's payrolls number. Job growth is still improving. It's still a debate whether the Fed will taper in September or October . A number like this near the 200,000 for both July and August could lead to the beginning of the tapering. People will likely forget about this after GDP number and the Fed decision later."

JACOB OUBINA, RBC CAPITAL MARKETS (NEW YORK), CHIEF FINANCIAL ECONOMIST:

"Ever since the November methodology change ADP has done a much better job of predicting non-farm payrolls so I think a number around 200,000 on Friday is extremely plausible."
 

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