US economy posts solid 3.7 pct growth in Q2 - NBK report

KUWAIT, Aug 30 (KUNA) -- The US economy continued to grow strongly in the second quarter of 2015, said a report by the National Bank of Kuwait (NBK) said on Sunday.
Expectations were for an increase of 3.2 percent, but the number came much stronger at 3.7 percent.
The big upward revision for Q2 (April-June) GDP to 3.7 percent from 2.3 percent last month and expectations of 3.2 percent has helped ease concerns that the US economy would be greatly affected by the situation in China, the NBK monetary developments report added.
Revisions were broad-based and included decent upgrades for structures and equipment spending in particular. There was an upward revision to government spending +2.6 percent from +0.8 percent which resulted in the largest quarterly increase for the sector since the Q2 of 2010. Meanwhile, Q2 personal consumption was revised up to 3.1 percent initial jobless claims declined 6k last week to 271,000 slightly below the four-week average of 272.500, the NBK said.
On China, the report said that it was probably the longest four days for Chinese officials as Chinese Stock market lost over 22 percent from Friday 21 until Wednesday 26.
The Chinese market rout propelled risk aversion sentiments across global markets as investors were left hoping that the People's Bank of China (PBOC) would deliver cuts and ease monetary conditions, it said.
The Chinese response came only on Wednesday as the PBoC cut the benchmark interest rates by 25bps and the RRR (Required Reserve Ratio) by 50bps, at the same time removed the ceiling on interest rates for term deposits with maturities greater than one year.
The Bank also issued a press release mentioning that monetary policy will become more flexible in the future and suggested that policy will become more data dependent. Following the intervention, global markets rebounded massively throughout the Asian, European and the US markets, the NBK stated.
As for Europe, it said that "dovish comments" from European officials started to come on Tuesday with European Central Bank (ECB) Vice President Vitor Constancio mentioning that inflation in the euro area was just 0.2 percent in July, while the slowdown in China's economy, renewed slump in oil prices and stock-market turmoil could add downward pressure.
Those remarks were echoed by the ECB Executive Board member Peter Praet, mentioning the European Central Bank "was ready to expand or extend its quantitative-easing program if needed as a slump in commodity prices and risks to global economic growth threaten its inflation goal." "Developments in the world economy and in commodity markets have increased the downside risk of achieving the sustainable inflation path toward 2 percent". He also reiterated that "there should be no ambiguity on the willingness and ability of the Governing Council to act if needed." (end) mfs.ht.abd.msa