The recovery in foreign trade and an increase in consumer spending in the second quarter (April – June) has helped the economy of United States to grow at an annualized rate of 2.3%.
The interest rates were left between 0 – 0.25% by the Federal Reserve. According to the Federal Open Market Committee the target range won’t be improved until the labour market has seen some further improvements. This led the first quarter growth to be revised upwards to 0.6%. The economic growth however continued according to the expectations.
The announcement made by the Federal Open Market Committee was based on the following changes:
• The rise in employment and new business growth in July led to an expansion in the services sector.
• Analysts had expected an increase of 5.7% in US home prices in the 20-city Case-Schiller index year-on-year to the end of May. However, it fell short of the expectations and rose only by 4.9%.
• The optimism of Americans about the prospects of the economy, employment and their finances fell down in July, which led to a sharp decline in consumer confidence, its lowest since August 2011.
• The durable goods ordered jumped 3.4% in June, following a revised 2.1% drop in May. Excluding a significant increase in orders for transportation equipment, durable goods orders still were up 0.8%.
After the threat of a Greek exit from the Euro diminished, the economic confidence in Europe increased to a four year high in July. According to IMF, until Greece doesn’t reach an agreement with European governments, it won’t discuss a new debt program with Greece.
The services sector improved in the United Kingdom and as a result the Q2 GDP grew by 0.7%. The economic growth in Spain continued to accelerate in the Q2, with GDP up 1%, following a 0.9% increase in Q1.
Volatile trading weeks in China led Chinese authorities hinting at more policy easing to boost liquidity and pledging to buy shares to stabilize the market.
In Japan, the industrial output rose by 0.8% in June, more than the forecast. The retail sales were up 0.9% from the last year. However, the growth rate slowed down for the second consecutive month.
In a bid to bring down inflation from 9.3% to its target of 4.5% in Brazil, the Brazil’s Central Bank raised the interest rates to 14.25%.