GDP revised up more than expected on stronger business and consumer spending

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US second-quarter growth was revised upward to the fastest pace in two years on stronger household spending and a bigger gain in business investment, putting the economy on a stronger track, Commerce Department data showed Wednesday.

For the second quarter, the government estimated that consumer spending grew at a 3.3% rate, the best showing in a year and up from an initial estimate of 2.8% growth.

The budget the president released in May projects GDP growth will rise to 3 per cent over the next four years and remain at that level for the rest of the decade.

The economy picked up from a 1.2% rate in the first quarter.

Trump frequently touts good economic news and accuses the media of failing to cover it.

The Bureau of Economic Analysis had anticipated the increase in real GDP would be 2.6 percent. But the current devastation in Southeast Texas is expected to impact the third quarter economic growth, with economic activity significantly disrupted in the Houston, Victoria, and Corpus Christi metro areas.

The result is a healthy upward revision from the government's initial estimate of 2.6% growth in the second quarter. Even with the upward revision, the weak start to the year means that growth over the past six months has averaged 2.1%, the same modest pace seen for the recovery that began in mid-2009.

"The ADP overshoot in August compared to our payroll model suggests we should move our forecast for Friday up to about 220K from 200K", said Ian Shepherdson, Chief economist at Pantheon Macroeconomics.

The upgrade was also considerably higher than preliminary estimates of 2.6 per cent, and also represented a considerably faster expansion than economists had expected, at 2.7 per cent. "All of those things weighed on USA growth".

President Donald Trump is relying on growth above 3% to generate enough revenue for the government to pay for tax cuts and more infrastructure spending.

We expect the strength of consumer and business spending to continue into the third quarter.

Likewise, the contribution from nonresidential fixed investment improved from 0.64 to 0.85 percentage points to real GDP growth for the quarter. "'GDP is down to 7 percent.' And I'm saying, 'We're hitting 1 percent'".

Residential investment fell by 6.5 percent, pulling back from really strong gains in both of the prior releases.

Consumer spending, biggest part of the economy, grew 3.3 percent (estimated 3 percent), most since second quarter of 2016 and revised from 2.8 percent.

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