U.S. economy up 3% in second quarter

by Susie Olson August 31, 2017, 1:30
U.S. economy up 3% in second quarter

"As is the case with most natural disasters, the impact on the USA economy will likely be both small and mixed as the early disruption to production and potential spikes in gas prices fade and are replaced by the positive impact of fix and reconstruction efforts", said David Kelly, chief global strategist at JPMorgan Funds.

"Real gross domestic product (GDP) increased at an annual rate of 3.0 percent in the second quarter of 2017, according to the "second" estimate released by the Bureau of Economic Analysis", the release stated. Goods exports increased by 2.3 percent in the second quarter, with goods imports up by 1.6 percent.

A final (third) estimate will not come until late September.

Mark Zandi, chief economist at Moody's Analytics, said he expected growth for the current quarter of 2.9 percent and a 2.6 percent gain for the fourth quarter. He predicted GDP would grow close to 3% this quarter. Last quarter's growth was the strongest since the first quarter of 2015.

The chief driver of second-quarter strength was consumer spending. Outlays on structures and equipment were also revised upward, suggesting companies are upbeat about rising orders amid steady US demand and the improving outlook for exports.

Spending by governments, which had grown 0.7% in the initial estimate, was revised to a decline at a 0.3% rate. In addition, there were marginal improvements seen for private inventory spending and net exports, but the drag from state and local government spending was bigger than previously thought.

"Underlying domestic demand in the economy is consistent with near three percent growth but the supply-side of the economy is not capable of delivering such a pace of growth at this point", said John Ryding, chief economist at RDQ Economics in NY. This morning, Bloomberg shows the US dollar up 0.80% against the loonie, at $1.26. That was up from the government's original estimate of a 1.9% gain. The average for the first half of 2017 was 2.1%. That would mark an improvement over past year when the economy grew a meagre 1.5 per cent, the poorest showing since 2009 when GDP shrank by 2.9 per cent.

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The pace of growth is in line with the Trump administration's long-term goal of 3 per cent.

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.

BMO senior economist Sal Guatieri isn't revising the bank's forecast for GDP in Q3.

GDP grew 1.2% in the January-March period.

Zandi is forecasting that growth in 2018 will be an even stronger 2.8 per cent. Inventories added 0.02 percentage point.

Commerce also revised upward its estimate of business investment, to a 0.6 percent pace from the initial 0.4 percent.

"We're still in the slow-lane economy", said Stuart Hoffman, senior economic adviser at PNC Financial Services Group.


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