US eco­nomic growth more than dou­bles to 2.6% in sec­ond quar­ter

Muscat Daily - - BUSINESS -

Wash­ing­ton, US - The US econ­omy gath­ered speed in the sec­ond quar­ter, more than dou­bling the growth of the first three months of the year as con­sumer and de­fence spend­ing ac­cel­er­ated, ac­cord­ing to data re­leased on Fri­day.

Gross do­mes­tic prod­uct (GDP) in­creased 2.6 per cent in the April-June pe­riod, com­pared to 1.2 per cent in the first quar­ter, the Com­merce De­part­ment re­ported.

The pre­lim­i­nary re­sult, which is cal­cu­lated from in­com­plete data and will be re­vised in the com­ing months, un­der­shot an­a­lyst ex­pec­ta­tions by two tenths of a point and por­trayed an econ­omy fac­ing sig­nif­i­cant head­winds.

A widen­ing trade gap as well as slow­ing hous­ing sales, busi­ness in­ven­to­ries, fixed in­vest­ment and spend­ing by state and lo­cal gov­ern­ments all weighed on growth, ac­cord­ing to the re­port.

Af­ter a slow start to the year, many economists had ex­pected the spring re­bound, given that first quar­ters have tended to see rel­a­tively slow growth in re­cent years.

But the sec­ond quar­ter re­sult, when added to a two-tenths down­ward re­vi­sion to the first quar­ter, put growth in the first half of 2017 at only 1.9 per cent - above the 1.5 per cent recorded last year but be­low the 2.2 per cent av­er­age of the prior three years.

De­fence spend­ing was a key driver, ris­ing at the fastest pace in six years at 5.2 per cent, more than off­set­ting the drop in non­de­fence spend­ing which sank 1.9 per cent, the big­gest loss since 2013.

Per­sonal con­sump­tion spend- ing jumped to 2.8 per cent from 1.9 per cent in the first quar­ter, and ex­ports of ser­vices like­wise blos­somed, adding 6.5 per cent, the largest quar­terly gain in more than four years.

But the con­tri­bu­tion to growth from home buy­ing saw the big­gest fall in nearly seven years, drop­ping 6.8 per cent.

‘There’s no rea­son to worry about the econ­omy ac­cel­er­at­ing into un­sus­tain­able growth, nor is there rea­son to worry about re- ces­sion’, econ­o­mist Chris Low of FTN Fi­nan­cial wrote in a note to clients.

Pres­i­dent Don­ald Trump took of­fice on a na­tion­al­ist agenda, vow­ing to boost growth to three per cent or higher by slash­ing taxes and reg­u­la­tion, fund­ing a ma­jor in­fra­struc­ture drive and re­vamped trade poli­cies.

Trump hailed the sec­ondquar­ter num­bers, say­ing they were a har­bin­ger of White House ef­forts to re­vive the econ­omy.

“GDP is up dou­ble from what it was in the first quar­ter,” he said dur­ing a visit to Brent­wood, New York.

“We’re do­ing re­ally well and we took off all those re­stric­tions,” he added. “We’ve sort of lib­er­ated the world of cre­at­ing jobs.”

But Trump’s leg­isla­tive agenda has re­mained backed up be­hind failed Repub­li­can ef­forts to re­peal the prior ad­min­is­tra­tion’s sig­na­ture health care laws.

‘The re­sult has thrown cold wa­ter on the hopes for a progrowth agenda’, econ­o­mist Diane Swonk said on Fri­day in a re­search note.

‘In fact, pol­icy un­cer­tainty, which places a drag on growth, is mea­sur­ably on the rise’.

(Bloomberg)

An Amer­i­can flag flies as cranes for ship­ping con­tain­ers stand in the dis­tance at the Port of Los An­ge­les

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