U.S. econ­omy ex­panded 2.6 per cent in Q2

The Hamilton Spectator - - BUSINESS - MAR­TIN CRUTSINGER

WASH­ING­TON — The U.S. econ­omy revved up this spring af­ter a weak start to the year, fu­elled by strong con­sumer spend­ing. But the growth spurt still fell short of the op­ti­mistic goals Pres­i­dent Don­ald Trump hopes to achieve through tax cuts and reg­u­la­tory re­lief.

The Com­merce De­part­ment said Fri­day that growth i n the gross do­mes­tic prod­uct, the econ­omy’s to­tal out­put of goods and ser­vices, ex­panded at a 2.6 per cent an­nual rate in the April-June quar­ter. That’s more than dou­ble the re­vised 1.2 per cent pace in the first quar­ter.

The im­prove­ment was pow­ered by a ro­bust re­cov­ery in con­sumer spend­ing af­ter a win­ter slow­down.

Trump cam­paigned on a pledge to boost growth to rates of four per cent or bet­ter. So far, his eco­nomic pro­gram has not ad­vanced in Congress.

Trump in May put for­ward a bud­get for next year that projects growth to steadily ad­vance in the com­ing years, hit­ting a sus­tained pace of three per cent an­nu­ally by 2021.

The Con­gres­sional Bud­get Of­fice and most pri­vate econ­o­mists are less op­ti­mistic, be­liev­ing growth rates have the po­ten­tial of im­prov­ing only slightly from the lack­lus­tre rates seen in the cur­rent re­cov­ery, the weak­est in the post-Se­cond World War pe­riod.

Also on Fri­day, the de­part­ment’s Bu­reau of Eco­nomic Anal­y­sis is­sued an an­nual bench­mark re­vi­sion of its data go­ing back three years. The re­vi­sion slightly boosted growth over the past three years, enough to lift the av­er­age growth in this re­cov­ery to an­nual gains of 2.2 per cent, up from the pre­vi­ous es­ti­mate of 2.1 per cent.

The 2.6 per cent growth in the se­cond quar­ter was the f astest pace since the econ­omy ex­panded at a 2.8 per cent rate in the third quar­ter of last year.

Much of the strength i n the April-June pe­riod came from con­sumer spend­ing, which grew at a 2.8 per cent rate, up from a 1.9 per cent growth rate in the first quar­ter. Con­sumer spend­ing ac­counts for 70 per cent of eco­nomic ac­tiv­ity. The econ­omy also ben­e­fited far more mod­est in­ven­tory re­duc­tions, which was a big drag on first quar­ter growth.

In the other ma­jor cat­e­gories, busi­ness in­vest­ment in plant and equip­ment grew at a 5.2 per cent rate. But hous­ing con­struc­tion tum­bled at a 6.8 per cent rate, a pay­back af­ter an 11.1 per cent surge in the win­ter due to warmer-thannor­mal weather. Econ­o­mists be­lieve hous­ing will re­sume grow­ing in com­ing quar­ters.

A shrink­ing trade deficit added a mod­est 0.2 per­cent­age point to growth as ex­ports rose while im­ports, which sub­tract from the GDP, grew at a slower pace.

Newspapers in English

Newspapers from Canada

© PressReader. All rights reserved.