Ahead of the Bell: US Economy-GDP

Analysts expect strong growth in spring to be followed by healthy gains in last half of 2014

Associated Press
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In this Sept. 19, 2014 photo, Laurette Eugene makes the final assembly of body armor at the Point Blank Body Armor factory in Pompano Beach, Fla. The government issues its third and final estimate of how fast the U.S. economy grew in the April-June quarter on Friday, Sept. 26, 2014. (AP Photo/J Pat Carter)

WASHINGTON (AP) -- The government issues its third and final estimate of how fast the U.S. economy grew in the April-June quarter. The report will come out at 8:30 a.m. EDT Friday.

SIZZLING GROWTH: The expectation is that the economy, as measured by the gross domestic product, expanded at an annual rate of 4.6 percent in the second quarter. That would be one of the strongest quarters of growth since the Great Recession came to an end more than five years ago.

A month ago, the government estimated that GDP was growing at an annual rate of 4.2 percent and it initially estimated GDP growth at 4 percent.

The upward revision in the final estimate is expected to come from stronger consumer spending and healthier business investment.

A surge of activity this spring was in part make-up from a terrible winter in which the overall economy went into reverse, shrinking at an annual rate of 2.1 percent.

Economists expect much less volatility in growth going forward. Many expect the economy to grow at an annual rate of around 3 percent in both the current July-September quarter and in the final quarter this year.

But because of the rough start to the year, growth for all of 2014 is expected to be a lackluster 2.1 percent, little changed from last year's 2.2 percent GDP increase.

But analysts have much a much brighter outlook for 2015. They believe that the economy is finally entering a period of above-trend growth as the unemployment level keeps falling and those growing payrolls translate into stronger consumer spending, which accounts for about two-thirds of economic growth.

Economists at JPMorgan Chase predict growth of 3 percent next year, a significant improvement over the average annual growth rates of around 2 percent that the country has experienced since the end of the recession in June 2009.

Federal Reserve policymakers last week decided to keep a key short-term interest rate at record lows, near zero, and indicated that they planned to keep it there for a "considerable time."

Analysts viewed the Fed's comments as support for their view that the Fed will not start to raise interest rates until the middle of next year. The low rates will help support more spending by consumers and businesses to boost growth and drive the unemployment rate lower.

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