U.S. economy growing at fastest pace since 2015

U.S. economy growing at fastest pace since 2015

The Commerce Department said Wednesday that the economy had expanded at an annual rate of 3 percent in the second quarter of the year, better than initially estimated, and a substantial acceleration over the first quarter's lackluster 1.2 percent pace.

The government said the rebound between April and June was fueled primarily by consumer spending on cars and other goods.

The revised number was 3.3 percent, versus an initial estimate of 1.9 percent. However, the current devastation in Southeast Texas is likely to hit growth in the third quarter, with economic activity substantially disrupted in the Houston, Victoria, and Corpus Christi metro areas. The revised consumer spending data was the highlight of this report, indicating that the consumer, aided along by solid job and income growth has definitely woken up after the first quarter lull, stated TD Economics.

Businesses helped to carry the economy in the second quarter, with spending on equipment jumping at a rate of 8.8 percent. Factors like net exports and residential investment barely changed, while government spending added only 0.1 percentage point.

Annual estimated growth was 3 percent, up from a 2.7 percent estimate in the first quarter and higher than the expected second-quarter gain of 2.6 percent. Corporate profits rose 1.3 percent in the second quarter following a drop of 2.1 percent in the first quarter. The average of real GDP and real GDI, a supplemental measure of US economic activity that equally weights GDP and GDI, increased 3.0 percent in the second quarter, compared with an increase of 2.0 percent in the first quarter.

Oil prices dip on refinery shutdown
All these uncertainties pushed gasoline futures prices up 3% from Friday's close, to US$1.7799, its highest level since June 2015. Both West Texas Intermediate and Brent barrel prices traded down on Tuesday as Tropical Storm Harvey continues to pound the U.S.

Trump talked up the latest figures in a speech Wednesday in Springfield, Missouri, laying out his plans for tax reform.

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.

Increases in consumer spending and business investment powered almost all of the revision issued on Wednesday. Personal consumption expenditures rose 3.3% over Q1, up from 2.8% in the first estimate and 1.9% in Q1.

The chief driver of second-quarter strength was consumer spending. That was the fastest in almost two years and was an upward revision to the 8.2 percent pace reported last month. But he said a 0.4 percentage point of that forecast reflects an assumption that the Trump administration will win a tax cut package that will take effect in early 2018.

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