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US GDP Growth Accelerates In Line With Estimates In Q2

29 July, 2017, 00:23 | Author: Paula Vaughn
  • The tech-heavy Nasdaq's streak of all-time high closes ended Thursday with Apple Google-parent Alphabet and Netflix shares all slumping at least 1.5 percent

The increase reflected increased consumer spending, exports, and increased spending by both the federal government and businesses.

Second-quarter US GDP increase at an annualised rate of 2.6% from a revised reading of 1.2% the previous quarter which was previously reported at 1.4%.

The Canadian dollar added to gains against the greenback immediately after the report, while traders increased their bets of another interest rate hike from the Bank of Canada, which earlier this month raised rates for the first time in almost seven years. However, growth at the start of 2017 raised alarm bells by slowing markedly.

The U.S. central bank left rates unchanged on Wednesday and said it expected to start winding down its portfolio "relatively soon". Economists polled by MarketWatch had forecast a 2.8% increase.

Manufacturing activity rose 1.1 percent, driven by makers of petroleum and coal products, as well as motor vehicles and parts.

On an annual basis, French GDP grew by 1.8% - again, slightly faster than Britain's 1.7% year-on-year growth. However, most economists wouldn't attribute the growth to the president's policies, since not much has been implemented yet. But Trump hasn't been able to get his economic agenda through Congress, so those expectations have been dialed back. So far, the impasse in Washington has not hurt either business and consumer confidence.

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The mining, oil and gas extraction sector accounted for almost 0.4 percentage points of May's overall economic growth.

The 2.6 percent growth in the second quarter was the fastest pace since the economy expanded at a 2.8 percent rate in the third quarter of previous year. That was an acceleration from the 1.9 per cent pace logged in the first 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. Annual wage growth has struggled to break above 2.5 per cent. That would follow two straight quarters when investment in homebuilding supported GDP growth. One amusing finding here is that following the revisions, Q3 2014 GDP is now said to have been 5.2%, while that abysmal Q1 2015 GDP print which was blamed on the weather is now 3.2%. As a result, investment on nonresidential structures increased at a 4.9 per cent pace, moderating from the January-March period's brisk 14.8 per cent rate.

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

"Even if the markets are juiced by good second-quarter GDP, there is a risk that it may be reversed as we come back from our summer holidays and the battle over the continuing resolution resumes with a potential government shutdown looming", said Megan Greene, chief economist at financial services firm Manulife.

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