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US Economy Rebounds Strongly in 2nd Quarter of 2014

The U.S. economy grew at rapid pace from April to June, rebounding at an annualized pace of four percent after a dismal winter that saw the nation’s gross domestic output shrink more than two percent. An upbeat President Obama says that’s no surprise. But others are taking a wait and see approach.

The U.S. economy bounced back to life in the April to June quarter as consumers and businesses went on a spending spree. The expansion was broad-based: U.S. exports grew sharply, businesses re-stocked inventories and state and local governments increased spending.

Speaking at a rally in Kansas City, President Barack Obama said it’s another sign that things are getting better.

“None of this is an accident. It’s thanks to the resilience and resolve of the American people. It’s also thanks to some decisions that we made early on and now America’s recovered faster and come farther than just about any other advanced country on Earth,” said Obama.

Despite the upbeat data, financial markets were mostly flat as investors took the longer view. This is just the first of several estimates for the second quarter.

Economist Sean Snaith at Central Florida’s Institute for Economic Competitiveness says it's too early to start celebrating.

“I’m not going to uncork the champagne with today’s data just yet. I think it’s good news but we need to string this good news together over time,” says Snaith.

Despite the burst of activity in the second quarter, Snaith says what happens in the third and fourth quarters will determine whether the recovery is sustainable. More telling, he says, is what the U.S. central bank does next.

"How will the Federal Reserve react if in fact the economic recovery is gaining momentum? Will this speed up the timing and the pace of interest rate hikes? In which case, that certainly could take some air out of the stock market," says Snaith.

The U.S. central bank upgraded its assessment of the economy on Wednesday - saying it will press ahead with plans to cut bond purchases by another ten billion dollars next month. The bond buying program has kept U.S. interest rates near record lows, helping to boost consumer and business spending. The Federal Reserve says it’s in no rush to raise interest rates - but economists warn continued low rates could fuel inflation.