U.S. economy expanded 2.6 per cent in Q2
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.