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U.S. GDP, Consumption Beats Wall Street Expectation

Nov 25,2014  Market News  Comment: 0

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New York City, New York – (StockNewsDesk) – 11/25/2014 — Standard & Poor’s (S&P 500) scaled new heights as Gross Domestic Product (GDP) of the largest economy in the world expanded beyond estimates. Additionally, encouraging reports from German economy also boosted investor sentiment. According to the Commerce Department, the GDP of the United States expanded at a seasonally annualized rate of 3.9% compared to the Street’s estimates of 3.3%. The second quarter expanded by 4.6%.

Manufacturing, factory orders and service industry have spearheaded the growth of the US economy. Personal consumption of the country is primarily responsible for the GDP’s expansion. Personal consumption grew 2.2% in the third quarter compared to analysts’ expectation of 1.9% and preliminary reading of 1.8%. Customer spending, which accounts for 70% of the economy, is the biggest driver of the nation’s economy. The GDP price index of the economy marginally bettered expectations by 0.1% at 1.4%. This better than expected economic reading pushed the S&P 500 index above the 2070 levels.

Another economic indicator which has pushed investor optimism to a new high is the S&P HPI composite index. It is a barometer which predominantly measures the housing economy. Although the S&P case-Schiller index grew modestly at 4.9%, it bettered the Street estimates of 4.7%. August had seen a reading of 5.6%. Prices of home barely increased by 0.2% in August while mostly remained flat for September. The Consumer Confidence index can play a role of a catalyst for the investor sentiment. Gradual increase in inflation, decrease in unemployment and better than expected GDP growth might push the confidence index above the estimates of 95.9.

U.S. GDP, Consumption Beats Wall Street Expectation

Euro zone Consumption Improves

Economic indicators from the Euro zone area also supported the U.S. market’s rally. Consumption figures of the Euro zone economy indicated towards an improving economy. The lawmakers estimated the consumption figures to go up by 0.1%. However, according to the numbers reported by the Euro zone, private consumption of area improved to 0.7% while public investment rose 0.6%. Private consumption reported the highest reading in past 3 years. However, there was negative news as well. Investment in the equipment sector declined 2.3%. Downfalls in investments were also seen in the gross capital and construction investment also.

These encouraging data came in after European Commission chief Mario Draghi extended support towards expansion of stimulus measures. Other factors which have provided support to the market are low unemployment, interest rates and increasing wages.

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