Brisk con­sumer spend­ing fu­eled economy’s re­bound in spring

Albuquerque Journal - - BUSINESS - BY MARTIN CRUTSINGER AS­SO­CI­ATED PRESS

WASH­ING­TON — The U.S. economy re­bounded sharply in the spring, grow­ing at the fastest pace in more than two years amid brisk con­sumer spend­ing on au­tos and other goods.

The gross do­mes­tic prod­uct, the broad­est mea­sure of eco­nomic health, grew at an an­nual rate of 3 per­cent in the April-June quar­ter, the Com­merce Depart­ment re­ported Wed­nes­day. It was the best show­ing since a 3.2 per­cent gain in the first quar­ter of 2015.

The re­sult is a healthy up­ward re­vi­sion from the gov­ern­ment’s ini­tial es­ti­mate of 2.6 per­cent growth in the sec­ond quar­ter. The growth rate in the Jan­uary-March quar­ter was a lack­lus­ter 1.2 per­cent.

Paul Ash­worth, chief U.S. econ­o­mist at Cap­i­tal Eco­nom­ics, said he be­lieved that the strength in con­sumer spend­ing should re­sult in an “even stronger hand-off” for growth go­ing into the cur­rent quar­ter.

Pres­i­dent Don­ald Trump hailed the lat­est fig­ures. “I hap­pen to be one that thinks we can go much higher than 3 per­cent. There is no rea­son why we shouldn’t,” Trump told a crowd in Mis­souri where he was cam­paign­ing for sup­port for the ad­min­is­tra­tion’s tax plan that would cut rates for in­di­vid­u­als and busi­nesses.

Dur­ing last year’s cam­paign, Trump pledged to boost eco­nomic growth to 4 per­cent or bet­ter.

The bud­get the pres­i­dent re­leased in May projects GDP growth will rise to 3 per­cent over the next four years and re­main at that level for the rest of the decade. How­ever, pri­vate economists and the non­par­ti­san Con­gres­sional Bud­get Of­fice be­lieve that fore­cast is un­re­al­is­tic, fore­cast­ing av­er­age growth of just 1.9 per­cent over the next decade.

Even with the up­ward re­vi­sion, the weak start to the year means that growth over the past six months has av­er­aged 2.1 per­cent, the same mod­est pace since the re­cov­ery be­gan in mid-2009.

Many economists had been fore­cast­ing growth in the cur­rent July-Septem­ber quar­ter would be around 3 per­cent. Some are now say­ing that the dev­as­ta­tion from Hur­ri­cane Har­vey could shave about a half-per­cent­age point off growth this quar­ter. How­ever, an­a­lysts be­lieve the pace of growth will bounce back once the re­build­ing be­gins and oil re­finer­ies get back to full pro­duc­tion, bring­ing down prices.

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