USA quarterly economic growth revised higher

An increase in household spending helped drive GDP growth in Q2 according to Statistics Canada | Shutterstock

USA second-quarter growth was revised upward to the fastest pace in two years on stronger household spending and a bigger gain in business investment, putting the economy on a stronger track, Commerce Department data showed Wednesday.

Gross domestic product, the value of all goods and services produced across the United States, expanded at an annualised rate of 3 per cent, revised from an initial estimate of 2.6 per cent and up from a sluggish 1.2 per cent increase from January to March, according to the Commerce Department.

The recent estimate marked the fastest growth in two years, the release said. Under President Barack Obama in 2013 and 2014, quarterly growth occasionally exceeded 3 percent.

The revisions bring the pace of first-half growth to 2.1 percent, about equal to the average rate since the last recession ended in 2009.

The 3 percent GDP growth was also revised up from the advance estimate, which showed economic growth increasing at 2.6 percent.

The US economic expansion gathered pace in the second quarter.

Somewhat stronger consumer spending and business investment were behind the upward revision.

This morning's report suggests that the US economy is on a more solid footing than previously thought with growth revised up more than expected - albeit on par with our own call.

Economists are not looking for Hurricane Harvey to make much of an impact on economic growth, believing that a spike in the cost of gasoline and other energy prices will be short-lived as refineries along the Texas Gulf Coast resume operations quickly.

The growth is the strongest since the first quarter of 2015, when it hit 3.2 percent, but not as high as the 5.2 percent spurt in the third quarter of 2014.

The Trump administration had pledged to return the USA economy to sustained annual growth of 3.0 percent or more by slashing taxes and regulations while boosting trade. "All of those things weighed on USA growth".

"Soft inflation is raising questions over whether the Fed will go ahead with another interest-rate hike this year", MarketWatch noted.

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

Increases in personal consumption expenditures (PCE) and in nonresidential fixed investment were larger than previously estimated.

Despite the acceleration in consumer spending, inflation remained benign in the second quarter.

Meanwhile, residential investment subtracted less that thought previously, shrinking 6.5 percent as did net exports that totalled -USD 613.4 billion.

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