USA economy grows at 2.6% in second quarter

Chelsea West
July 29, 2017

Government spending, a laggard during most of the recovery, rose again after declining in the first quarter.

Real GDP increased at an annual rate of 2.6% in the second quarter, up from 1.2% in the first three months. Federal government spending provided a significant boost (2.3% increase), although that reflects a lot of defense spending (5.2% increase).

There was also a positive reading for investment with a 2.0% increase following a 1.2% contraction for the previous quarter.

"Investment, which has disappointed over the past couple years, is coming back, and that's an encouraging sign for the future", said Seville.

The growth rate for the first quarter was cut to 1.2%, compared with the previous estimate of 1.4%. His budget is based on forecasts that growth will rise steadily and hit sustained rates of 3 percent by 2021. But while the current economic expansion is already the third-longest on record, rates of growth have remained stubbornly low, due to longer-run changes in the economy, such as the aging of the USA population.

Consumer spending, which makes up more than two-thirds of the USA economy, grew at a 2.8 percent rate.

"While that very impressive headline comes with a caveat - last May was depressed by the Alberta wildfires - even excluding that factor leaves the underlying growth trend well above three per cent", Bank of Montreal chief economist Doug Porter wrote in a note to clients. It was the third straight quarterly increase. He has set an ambitious 3% growth target for 2017.

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"This is only going to strengthen the case for them", he said of the central bank.

Other measures of the economy remain strong, which should push up inflation over time. Construction output fell by 0.6 per cent.

Companies such as Boeing, Facebook and Shell reported strong quarterly earnings this week.

Canada's economy is roaring ahead, and at a much faster pace than anyone had expected.

Earlier this week, the International Monetary Fund revised down its United States growth forecast for this year from 2.3% to 2.1%.

The loonie surged on the news, jumping back above the 80-cent plateau to close Friday's trading day up 0.77 cents at 80.39 US cents.

A resurgence in consumer spending accounted for the bulk of the pickup in in the second quarter, helped by a steady job market and household finances boosted by stock and home-equity gains.

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