US Economy Ignites as GDP Growth and Earnings Surpass Expectations

Contrary to recent media headlines, the fundamentals of the US economy are strong. The global oil price and elevated yields on longer-dated U.S. Treasuries are distractions from a solid economic performance.

The Federal Reserve Bank of Atlanta projects GDP growth for the current quarter at 4.8%. This is supported by the Institute for Supply Management's August survey, which produced a strong reading of 54.6 in the US manufacturing sector. The manufacturing sector has now expanded for eight consecutive months.

The labor market remains healthy and resilient with unemployment claims running at historically low levels. The ADP survey of private-sector employment showed that American businesses continue to add jobs.

Households are also benefiting from solid real income gains, despite elevated prices for gasoline and other fuels. Household balance sheets are strong, consumers have been reducing their debt obligations, and household wealth is at record levels.