United States economy rebounds in the second quarter

29 July, 2017, 00:56 | Author: Franklin Nunez
  • Traders work on the floor of the New York Stock Exchange

Consumer spending, which makes up more than two-thirds of the United States economy, grew at a 2.8 per cent rate, accelerating from 1.9 per cent pace in the first quarter.

Specifically, that metric went from 1.4% to 1.2%, while the Fed's favorite inflationary metric, core PCE, tumbled from a downward revised 1.8% to 0.9%.

Friday's GDP data is the first of three measurements the Commerce Department will take of the economy in the second quarter. The core is similar, at 1.1% and down from 2.4% in the first quarter.

The latest growth figures suggest the Federal Reserve could still raise interest rates later this year, which would be the third increase in 2017.

Drilling down into the major categories of GDP contributors shows that the faster rate of consumer spending compensated for relatively weaker inputs from other corners of the economy.

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According to the Commerce Department, GDP was up 2.6% in the quarter, short of forecasts by 0.3%. President Donald Trump has set an ambitious 3.0 per cent growth target for 2017.

Prices of US government debt rose after the release of the data while the dollar initially fell against a basket of currencies.

The BEA also revised up growth in 2015 by 0.3 percentage points to 2.9 per cent, meaning the nation recorded the strongest growth since 2005 during that year.

Previously is had been estimated to be 2.1 percent. Therefore, net exports added 0.18 percentage points to real GDP growth. Consumer spending accounts for 70% of USA economic activity.

Along those lines, durable goods spending was marginally negative in the first quarter with consumers more cautious, but jumped 6.3 percent at the annual rate in the second quarter.

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The revisions made minor changes to economic history, putting growth at 2.6 percent in 2014, up from 2.4 percent.

Business investment increased 5.2%, down from 7.2% in the first quarter.

Government spending, a laggard during most of the recovery, rose again after declining in the first quarter. And it also lifted growth by the same 0.1 percentage point over the eight-year expansion, now the third longest in US history.

The pick-up was helped by consumer spending in the quarter expanding at a pace of 2.8%, and businesses stepping up spending on equipment.

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