U.S. eco­nomic data point to im­prove­ment

Gov­ern­ment re­port re­flects strong con­sumer spend­ing this spring

Sun Sentinel Palm Beach Edition - - MONEY - By Martin Crutsinger

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 Jan­uaryMarch 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. He pre­dicted GDP would grow close to 3 per­cent this quar­ter.

For the sec­ond quar­ter, the gov­ern­ment es­ti­mated that con­sumer spend­ing grew at a 3.3 per­cent rate, the best show­ing in a year and up from an ini­tial es­ti­mate of 2.8 per­cent growth. Much of the strength came from a sharp up­ward re­vi­sion in spend­ing on au­tos, which the gov­ern­ment ini­tially es­ti­mated as de­clin­ing in the spring.

In­vest­ment by busi­nesses also im­proved to growth of 6.9 per­cent. Spend­ing by gov­ern­ments, which had grown 0.7 per­cent in the ini­tial es­ti­mate, was re­vised to a de­cline at a 0.3 per­cent rate. The down­grade re­flects a 1.7 per­cent fall in spend­ing by state and lo­cal gov­ern­ments.

This was the sec­ond of three es­ti­mates the gov­ern­ment will pro­vide for sec­ond-quar­ter growth. 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 seen for the re­cov­ery that be­gan in mid-2009.

Pres­i­dent Don­ald Trump’s bud­get projects growth rates will climb to a sus­tained an­nual rate of 3 per­cent, which many economists be­lieve is too op­ti­mistic. The Con­gres­sional Bud­get Of­fice sees growth av­er­ag­ing 1.9 per­cent over the next decade.

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.

For the year, Mark Zandi, chief econ­o­mist at Moody’s An­a­lyt­ics, is fore­cast­ing growth of 2.1 per­cent.

Newspapers in English

Newspapers from USA

© PressReader. All rights reserved.