US economy likely accelerated in Q2
WASHINGTON (Reuters) – 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 probably increased at a 2.6-percent 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-percent rate, which would be more than double the first quarter’s 1.4-percent growth pace. The Commerce Department will release its advance second-quarter GDP estimate on Friday at 8:30 a.m. EDT.
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 mortgagebacked securities in September as well as raise interest rates for a third time this year.
“The Fed is certainly looking for a rebound in the strength of GDP growth that maintains the moderate economic expansion we have seen during this current economic cycle,” said Sam Bullard, a senior economist at Wells Fargo Securities in Charlotte, North Carolina. “That would allow plans for further monetary policy tightening.”
The US central bank left rates unchanged on Wednesday and said it expected to start winding down its portfolio “relatively soon.”
Even if GDP growth regains momentum in the second quarter, it will probably not exceed 2.5 percent for the full year. US President Donald Trump had set an ambitious three percent growth target for 2017.