Government revises GDP growth up slightly over past 3 years

Reuters

Reuters

Household outlays rose at a 2.8% pace, an improvement from the first quarter's 1.9%.

While inventory investment slightly subtracted 0.02 percentage point from economic growth in the second quarter, trade added 0.18 percentage point to the growth in the quarter, according to the Commerce Department. 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.

Economic activity in the USA increased in line with economist estimates in the second quarter, according to a report released by the Commerce Department on Friday. Consumer spending rose 2.8%, and business spending went up 5.2%.

Consumer spending, which makes up more than two-thirds of the United States economy, accelerated from the 1.9% growth figure from the first quarter. Eight years later, the country has entered the third-longest but also the slowest expansion since World War II, with GDP growth averaging a little over 2%. Many of President Donald Trump's economic plans, including tax cuts and the administration's budget, rely on having higher economic growth to generate more revenue for the government.

The economy grew by 0.6 percent in May from a month earlier, Statistics Canada said on Friday, exceeding economists' forecasts for 0.2 percent. First-quarter growth was the weakest in a year. With that said, spending on motor vehicles remained soft.

Yet the International Monetary Fund said that its forecast for global growth remained unchanged, given strengthening economies in France, Germany, Italy, Spain, Japan and Canada. While that was down from the first quarter's 7.2%, it is still one of the best readings since 2014.

"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.

The Commerce Department is boosting growth in two of the past three years, helped by a new approach to accounting for gasoline sales at big chains stores such as Wal-Mart. "The issue of "residual seasonality" is likely to persist through the upcoming revision".

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