GDP Growth Revised Upward to 3% for Q2
- Author: Eleanor Harrison Aug 31, 2017,
Aug 31, 2017, 1:09
Real GDP increased by an annualized 3.0% in the second quarter of 2017 according to the second BEA estimate (previously reported as a 2.6% gain).
The rate surpassed analyst expectations, which called for an increase of 2.7 percent.
"Underlying domestic demand in the economy is consistent with near three percent growth but the supply-side of the economy is not capable of delivering such a pace of growth at this point", said John Ryding, chief economist at RDQ Economics in NY.
Nonfarm inventories rose by 0.15%, compared with a drop of 1.59% in the prior quarter, while exports rose by just 0.45%, compared with an increase of 0.85% in the first quarter.
The 3 percent GDP growth was also revised up from the advance estimate, which showed economic growth increasing at 2.6 percent.
The Commerce Department issues its second look at the performance of the overall economy for the April-June quarter.
It will take more than one quarter's data for the White House or congressional Republicans to be able to claim credit for lifting the economy's growth trajectory.
Economists are also estimating how Hurricane Harvey could affect third-quarter growth.
The dollar firmed against a basket of currencies, while prices for U.S. Treasuries fell.
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.
"Soft inflation is raising questions over whether the Fed will go ahead with another interest-rate hike this year", MarketWatch noted.
Personal consumption expenditures rose by 2.8 percent in the second quarter, accelerating from the 1.9 percent pace seen in the first quarter on an increased willingness to purchase goods.
This was the second of three estimates the government will provide for second-quarter growth.
Nonresidential fixed investment rose 6.9 per cent, up from an initial estimate of 5.2 per cent. Outlays on intellectual property products, structures and equipment were revised upward.
The acceleration in GDP increases chances that the Federal Reserve would announce the process of reducing its $4.5 trillion balance sheet at its forthcoming meeting in September. Still, the weak inflation figures remain a constraint at this point. The downgrade reflects a 1.7% fall in spending by state and local governments.