USA economy rebounds in the second quarter

Ann Santiago
July 29, 2017

That was more than double the growth rate of the first quarter, which was downwardly revised to 1.2 per cent from a previously reported 1.4 per cent pace, Efe news reported.

The "Big Six" tax reform negotiators released an update this week but it once again lacked any significant detail other than to officially announce the demise of a border adjustment tax that was to generate over $1 trillion in annual revenue to help offset the cost of reducing rates. The core is similar, at 1.1% and down from 2.4% in the first quarter.

But with wage growth remaining sluggish despite the labor market being near full employment, there are concerns that consumer spending could slow in the third quarter.

According to the Commerce Department, GDP was up 2.6% in the quarter, short of forecasts by 0.3%. For this year, many analysts believe growth will come in around 2.2 percent, essentially where growth has been since the recovery began in mid-2009. And the US dollar, which rallied after the election, has retreated sharply in recent months.

Specifically, final sales to private domestic purchasers q/q rose 2.7% in 2Q after rising 3.1% prior quarter.

The International Monetary Fund (IMF) also said on Thursday that it expected the US economy to grow at 2.1 percent this year and next, supported by solid consumption growth and a rebound in investment.

Consumer spending grew 2.8% in the second quarter, up from 1.2% the first three months of the year as Americans benefited from solid job and income growth as well as cheap gasoline. Annual wage growth has struggled to rise above 2.5 percent.

But the contribution to growth from home buying had its biggest fall in almost seven years, slipping 6.8 percent.

The Fed's favored measure of inflation - a personal consumption expenditures price index that excludes volatile price changes in food and energy - grew just 0.9 percent in the first quarter, below the Fed's target rate. And it was 1.5 percent in 2016, the only year to see a small reduction from the previous estimate of 1.6 percent.

Business investment increased 5.2%, down from 7.2% in the first quarter. The increase in business investment reflected increases in all three components: structures, equipment, and intellectual property products.

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