US economy grew 2.3% in second quarter

This comes after a disappointing first quarter that saw the economy grow by a revised 0.6 per cent. Meanwhile, Europe has been consumed with resolving a stubborn debt crisis in Greece. It expects China to expand 6.8 per cent, which would be the slowest growth rate for the country in 25 years. Real exports of goods and services rose 5.3 per cent in the three months through June, outpacing a 3.5 per cent rate in imports growth. It’s unclear how much confidence Thursday’s “okay” GDP report will give the Fed’s committee members.

The Fed also needs to be convinced that price gains will eventually rise toward its target of 2 per cent a year.

The economy continues to face some obstacles as it seeks to break out of the tepid growth pattern that has prevailed since the recovery began in 2009.

The GDP report did offer some encouragement on the inflation front.

Recent figures have shown the US economy creating more than 200,000 jobs a month, and the unemployment rate has now dropped to 5.3%.

When the economy endures a negative shock, as seen during the financial crisis, it requires monetary stimulus to expand at an above-potential rate and thereby eliminate the economic slack that became abundant during the downturn and foster a pickup in inflation. That’s a healthy sign for the economy given that consumer spending makes up the majority of America’s economic growth. Seeing the latest data, IHS economist Behravesh is marking September on his calendar for the first rate hike since 2006.

Although it kept the benchmark rate at the current low level on Wednesday, the Fed may be ready to move on rates as soon as September.

“Arguably not as bad as expected January to June, the economy will now have to ramp up activity to a 3% average pace on the back end (July to December) to meet the Fed’s twice-lowered bar of expectations”, says Lindsey Piegza, chief economist with Stifel. Faster-than-estimated private investment growth, mostly concentrated in the first quarter of 2015, partially offset these shifts. New figures provided by the Bureau of Economic Analysis show that economic growth in nearly every quarter since 2012 was weaker than previously calculated.

The Commerce Department said first quarter GDP was revised upward to growth rate of 0.6 percent, reversing previous estimates that showed the economy shrinking in the Jan.-March period. The improvement in the trade balance contributed 0.13 percentage points to growth after subtracting 1.92 percentage points in the first quarter.

Economic activity in the first quarter was originally reported to have ticked up only 0.2 percent, weighed down by a strong dollar, a West Coast port strike and weak worldwide performance.

CNBC found that first quarter GDP has run substantially below prior quarters for both the past six years of the expansion and for as long as 30 years, leading to what appeared to be outsized market anxiety over slowdowns that could be more statistical than real.