US Economic Growth Revised to 3%, Stronger Household Spending
- The pace of growth is in line with The Trump Administration’s long-term goal of 3% as the President’s policies kick in.
US Q-2 growth was revised upward to the fastest pace in 2 years on stronger household spending and a bigger gain in business investment, putting the economy on a stronger track, Commerce Department data showed Wednesday.
Highlights of GDP (Q-2, 2nd Estimate)
- GDP (gross domestic product) rose at a 3% annualized rate from prior Quarter (est. 2.7%); revised from initial estimate of 2.6%
- Consumer spending, biggest part of the economy, grew 3.3% (est. 3%), most since second quarter of 2016 and revised from 2.8%
- Nonresidential fixed investment rose 6.9%, revised from initial increase of 5.2%
Corporate pretax earnings rose 7% Y-Y; up 1.3% Q-Q
The revisions indicate greater momentum going into 2-H of Y 2017, as well as showing that growth in GDP — the value of all goods and services produced — may be broadening beyond household spending.
The upward revision to consumption reflects spending on wireless-phone services, used cars and electricity and nat gas, according to the report.
American consumers remain in the driver’s seat in the current expansion, backed by a strong job market, contained inflation, low borrowing costs and confidence in The Trump Administration’s economic policies.
Business spending got a boost from software, helping intellectual-property investment rise at a 4.9% pace, up from an initially reported 1.4%. Outlays on structures and equipment were also revised upward, suggesting companies are upbeat about rising orders amid steady US demand and the improving outlook for exports.
The 1st look at corporate profits for the Quarter bodes well for business investment and for hiring, which has been robust so far this year. A separate report Wednesday from the ADP Research Institute showed companies added more workers than forecast in August, a positive sign ahead of theUS Labor Department’s monthly payrolls data due Friday.
The pace of growth is in line with The Trump Administration’s long-term goal of 3%. Fallout from Hurricane Harvey may pare Q-3 growth, though reconstruction is likely to help expansion in the following frame.
The revisions bring the pace of 1-H growth to 2.1%, higher than the average rate since the last Recession ended in Y 2009 as overseen by The Hussein Obama Admin.
Many economists had anticipated a Q-2 rebound following 1.2% GDP growth in Q-1 of this year.
- Nonresidential fixed investment, which includes spending on equipment, structures and IP (intellectual property), added 0.85 percentage point to growth, more than the 0.64 point previously estimated
- Residential investment shrank at a 6.5% rate, less than initial estimate of a 6.8% decline
- Net exports added 0.21 percentage point to growth, revised up from 0.18 point; inventories added 0.02 point after an initially estimated drag of 0.02 point
- Stripping out trade and inventories — the 2 most volatile components of the GDP calculation — final sales to domestic purchasers rose 2.7% compared with a previously reported 2.4% pace
- Government spending decreased at a 0.3% rate, dragging down growth by 0.05 percentage point; the downward revision reflected state and local outlays on construction
- Gross domestic income rose at 2.9% pace after 2.7% in prior Quarter
- After-tax incomes adjusted for inflation increased at an unrevised 3.2% annual pace; saving rate was revised to 3.7% from initial estimate of 3.8%
- Wages and salaries for Q-2 climbed by $91-B, revised up from an $89-B increase initially estimated
- Fed’s preferred price index, excluding food and energy, rose at an unrevised 0.9% annualized rate last Quarter, matching the weakest gainer since Y 2010
- GDP report is the 2nd of 3 estimates for the Quarter; the 3rd is due in September as more data become available