United States economy grows at 2.6% in second quarter

By Lucia Mutikani

By Lucia Mutikani

Many economists expect the central bank will wait until October so as not to shock the economy with a rapid rise in borrowing costs, given the recent rise in the Canadian dollar which makes exporters less competitive.

Gross domestic product, a broad measure of goods and services produced in the USA, rose at a 2.6% annual rate in the April to June period, the Commerce Department said Friday.

United States growth rates have the potential of improving from the anemic rates seen in the Hussein Obama recovery, the weakest in the post-World War II period. The core is similar, at 1.1% and down from 2.4% in the first quarter.

The second-quarter advance is a welcome rebound after a lackluster start to the year, when GDP grew at only 1.2% pace.

Consumer spending, which makes up more than two-thirds of the USA economy, accelerated from the 1.9% growth figure from the first quarter.

Stuart Hoffman, PNC senior economic adviser, said that "real consumer spending once again did the heavy lifting" in terms of economic growth.

Fixed investment was the biggest strength in the first quarter data, and while it remained encouraging in the second quarter, the rate of growth slowed somewhat.

"Investment, which has disappointed over the past couple years, is coming back, and that's an encouraging sign for the future", said Seville. He has set an ambitious 3% growth target for 2017.

Overall, the revisions did not change the USA economy's broader picture and confirmed that the current expansion cycle is the slowest on record.

The faster pace of expansion was driven by 2.8 per cent annual growth in consumer spending, up from a 1.1 per cent rate of growth in the first quarter. That was about what economists had expected. Employers are adding jobs at a steady pace, and the unemployment rate fell to a 16-year low in May, before ticking up in June. The S&P 500 and the tech-heavy Nasdaq Composite opened slightly lower Friday, after reaching fresh highs earlier in the week. 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. Pledges by the Trump administration to cut taxes and boost infrastructure spending have been pushed back due to conflicts in Congress and the White House. But analysts say it will likely be fairly modest and won't create the kind of sustained economic boom Trump has promised.

That makes this the third-longest economic expansion in USA history, behind the 1990s (120 months) and the 1960s (106 months), according to Gus Faucher, chief economist at PNC Financial Services.

Meanwhile, the trade picture has improved so far in 2017 relative to challenges seen in each of the past two years, with positive contributions to real GDP in both the first and second quarters.

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