Finance

US economic growth upgraded to 3 percent rate in Q2

US economic growth upgraded to 3 percent rate in Q2”

Quarterly growth, however, can vary widely from the annual average; GDP growth exceeded 3 percent in five quarters since mid-2013, but the overall growth rate each year was ultimately tempered by lax growth in other quarters. Increased business spending also helped lift the latest estimate above the Commerce Department's initial reading of 2.6 percent for the quarter.

The upward revision to consumer spending reflected upward revisions to exports, federal government spending and private inventory investment.

That was revised up from the 2.8 percent pace reported in July and accounted for the bulk of the pickup in economic growth in the second quarter.

Even with the expected upward revision, GDP growth is still falling short of the optimistic goals President Donald Trump hopes to achieve through tax cuts, regulatory relief and tougher enforcement of trade agreements. It was the best showing since a 3.2 per cent gain in the first quarter of 2015. The growth rate in the January-March quarter was a lacklustre 1.2 per cent.

"The revised GDP growth rate likely comes as a sigh of relief for folks looking for further confirmation that the USA economy is moving along swiftly", says Mike Loewengart, investment strategist at Etrade.

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The Bureau of Economic Analysis (BEA) said consumers spent more than previously estimated on items such as housing and utilities, while businesses invested in categories such as equipment and intellectual property. "'GDP is down to 7 percent.' And I'm saying, 'We're hitting 1 percent'". "Households can not, however, continue to rely on savings indefinitely to fund their consumption", CNBC said.

The strength of consumer and business spending is expected to continue into the third quarter.

Most of the upward revision was due to stronger consumption spending, which expanded 3.3 percent from the initial estimate of 2.8 percent. That was the fastest in almost two years and was an upward revision to the 8.2 percent pace reported last month. Inventories added 0.02 percentage point.

Investment on nonresidential structures increased at a 6.2 percent pace, rather than the previously reported 4.9 percent rate. Housing was a drag on growth in the last quarter, with investment on homebuilding recording its worst performance in almost seven years.

Consumer spending powered the second-quarter surge, rising a revised 3.3% compared to the government's original estimate of a 1.9% gain. Motor vehicle production rebounded after two straight quarters of declines.



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