Acceleration: GDP Rises At 2.6% Annual Pace


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%.

This preliminary report, based on incomplete data, showed that GDP increased by 2.6%, and signaled that the growth slowdown in the first three months of this year was temporary.

Friday's GDP data is the first of three measurements the Commerce Department will take of the economy in the second quarter.

In July, the Bank of Canada opted to raise interest rates for the first time since 2010. That stronger global environment, combined with recent weakness in the US dollar, is likely to help boost American exports in coming months. US stock index futures pared losses slightly. "There is more here for the Fed doves than the hawks". This is not far from the 2.1 percent average growth rate seen since the Great Recession, but I continue to believe that there is upward potential in the forecast, especially for 2018, if pro-growth policies are enacted. President Donald Trump has set an ambitious 3.0 per cent growth target for 2017. But Trump hasn't been able to get his economic agenda through Congress, so those expectations have been dialed back.

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

Along those lines, durable goods spending was marginally negative in the first quarter with consumers more cautious, but jumped 6.3 percent at the annual rate in the second quarter. That was an acceleration from the 1.9 percent pace logged in the first quarter.

Details within Friday's report were generally positive.

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PCE rose 2.8% and was the biggest contributor to growth.

Inflation was subdued in the second quarter.

The second-quarter advance is a welcome rebound after a lackluster start to the year, when GDP grew at only 1.2% pace. The central bank hiked rates by a quarter-point in June, the third such increase in six months, and is widely expected to be considering another rate hike in December. Companies increased investment in equipment such as computers by 8.2%, though spending on structures such as oil rigs and offices grew more slowly. Are We in for a Rude Awakening?

While businesses probably continued to carefully manage their inventories, they appeared to spend more in some places. For all of 2016, GDP was revised down slightly to 1.5%, from 1.6% previously. Growth in 2015 is now 2.9 percent, up from 2.6 percent.

Nonetheless, other areas of growth were also strong, including manufacturing and retail, with the second quarter on track for growth of around 3.5 percent, said Exarhos.

The country's goods-producing industries led the growth, rising 1.6 per cent. Oil and gas extraction surged 7.6 per cent as activity at a facility in Alberta recovered after a fire and explosion in March that caused production difficulties, the statistics agency said.