Published: Sat, July 29, 2017
Markets | By Erika Turner

USA economy rebounds to 2.6% growth in Q2

USA economy rebounds to 2.6% growth in Q2

Consumer spending, which makes up more than two-thirds of the U.S. economy, accelerated from the 1.9% growth figure from the first quarter. Economists had expected the Q2 figure to be closer to 2.7%.

The dollar fell against a basket of currencies after the release of the data, while prices for United States government bonds rose. Consumer spending rose 2.8%, and business spending went up 5.2%.

Consumer spending, which represents more than two-thirds of all US economic output, came in at a stronger than anticipated 2.8% annual rate. Eight years later, the country has entered the third-longest but also the slowest expansion since World War II, with GDP growth averaging a little over 2%. But Trump hasn't been able to get his economic agenda through Congress, so those expectations have been dialed back.

Statistics Canada said goods-producing industries rose 1.6 per cent, driven by a 4.6 per cent increase in the mining, quarrying, and oil and gas extraction sector. The economy is forecast to grow 2.7% in third quarter.

"I am a little anxious about the consumer in the second half of this year because of the lack of wage growth", said Ryan Sweet, senior economist at Moody's Analytics in Westchester, Pennsylvania.

The recent slowdown in Toronto home sales following provincial measures to rein in the market was starting to weigh on economic growth, with activity at offices of real estate agents and brokers tumbling 6.3 percent.

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This is the first economic report that captures the first full quarter of GDP growth since Trump became president. That would follow two straight quarters when investment in homebuilding supported GDP growth.

With a solid labor market keeping household spending in the driver's seat and business investment and trade providing further help, demand looks set to expand around the rate it's pretty much been growing.

While businesses probably continued to carefully manage their inventories, they appeared to spend more in some places.

It is also still short of the 3 percent growth targeted by the president's team to achieve its economic objectives.

But business stockpiling was a slight drag on growth after substantially adding to gains in the first quarter.

The GDP deflator came in at 1.0% from 2.0% previously and below expectations of a 1.3% increase.

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