US GDP advances 2.6% in second quarter

Marcus Newton
July 29, 2017

The pace of USA economic growth picked up in the second quarter after a tepid showing in the first three months as consumer spending picked up pace, and federal government investment and exports expanded. Goods exports increased by 2.8 percent in the second quarter, with goods imports up by 2.0 percent.

The dollar fell against a basket of currencies after the release of the data, while prices for USA government bonds rose. Consumers stepped up spending on both goods and services, possibly reflecting a broadly positive outlook since the election.

"The economy is moving along at a pace that's unexciting but not worrisome", said Michael Feroli, chief USA economist at JPMorgan Chase in NY. Average GDP growth during the period through the end of past year is now at 2.2 percent, up from 2.1 percent previously. Many of President Donald Trump's economic plans, including tax cuts and the administration's budget, rely on having higher economic growth to generate more revenue for the government. But Trump hasn't been able to get his economic agenda through Congress, so those expectations have been dialed back. That was an acceleration from the 1.9 per cent pace logged in the first quarter. Helped by the strong job market, personal spending grew at a 2.8% pace, faster than in the first quarter.

But with wage growth remaining sluggish there are concerns spending may slow in the next quarter. Annual wage growth has struggled to break above 2.5 per cent.

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While businesses probably continued to carefully manage their inventories, they appeared to spend more in some places.

But the contribution to growth from home buying had its biggest fall in almost seven years, slipping 6.8 percent. That would follow two straight quarters when investment in homebuilding supported GDP growth.

Alongside the second-quarter GDP report, the government will publish revisions to data going back to 2014, including the first-quarter GDP estimate.

"You should never read too much into any one quarter's GDP data, especially the notoriously volatile first estimate which has a substantial guess component to it", said Harvard professor Jason Furman, who served as chairman of the Council of Economic Advisers under former President Barack Obama.

Other reports by MaliBehiribAe

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