Consumers, businesses likely spurred US economic pickup in Q2

WASHINGTON — The US economy likely accelerated in the second quarter as consumers ramped up spending and businesses invested more on equipment, which would confirm that the sluggish performance early in the year was temporary.

Gross domestic product (GDP) probably increased at a 2.6% annual rate in the April-June period, according to a Reuters survey of economists. The poll, however, was conducted before the release of data on Thursday that showed a sharp drop in the goods trade deficit in June and strong gains in wholesale and retail inventories.

That data prompted economists to raise their GDP growth forecasts to as high as a 3.5% rate, which would be more than double the first quarter’s 1.4% growth pace. The Commerce Department will release its advance secondquarter GDP estimate on Friday at 8:30 a.m. EDT (1230 GMT).

A rebound in growth, together with a tightening labor market, would leave the Federal Reserve on course to announce a plan to start reducing its $4.2-trillion portfolio of Treasury bonds and mortgage-backed securities in September as well as raise interest rates for a third time this year.

Even if GDP growth regains momentum in the second quarter, it will probably not exceed 2.5% for the full year. President Donald Trump had set an ambitious 3.0% growth target for 2017.

A resurgence in consumer spending likely accounted for the bulk of the pickup in economic growth in the second quarter. Consumer spending, which accounts for more than two-thirds of the US economy, grew at a 1.1% rate in the first quarter, the weakest performance in a year.

Business spending on equipment is expected to have picked up from the first quarter’s 7.8% rate, marking a third straight quarterly increase. Investment on nonresidential structures like oil and gas wells likely provided another boost to GDP growth in the second quarter. —