NEW YORK – United States second-quarter growth was revised upward to the fastest pace in two 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 (Second quarter, second estimate)
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- Gross domestic product rose at a 3 percent annualized rate from prior quarter (est. 2.7 percent); Revised from an initial estimate of 2.6 percent
- Consumer spending, the biggest part of the economy, grew 3.3 percent (est. 3 percent), the most since the second quarter of 2016; Revised from 2.8 percent
- Nonresidential fixed investment rose 6.9 percent, revised from initial increase of 5.2 percent
- Corporate pretax earnings rose 7 percent year over year
Key takeaways
The revisions indicate greater momentum going into the second half of 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 natural 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 and low borrowing costs.
Business spending got a boost from software, helping intellectual-property investment rise at a 4.9 percent pace, up from an initially reported 1.4 percent. Outlays on structures and equipment were also revised upward, suggesting companies are upbeat about rising orders amid steady U.S. demand and the improving outlook for exports.
The first look at corporate profits for the quarter also bodes well for business investment and for hiring, which has been robust so far this year. A separate report on Wednesday from the ADP Research Institute showed companies added more workers than forecast in August, a positive sign ahead of the Labor Department’s monthly payrolls data due Friday.
Even though the pace of growth is in line with the Trump administration’s long-term goal of 3 percent, many analysts don’t expect that rate to be maintained in the coming years or even in the coming months. Fallout from Hurricane Harvey may also trim third-quarter growth, though reconstruction is likely to help expansion in the following period.
The revisions bring the pace of first-half growth to 2.1 percent, about equal to the average rate since the last recession ended in 2009. Economists had anticipated a second-quarter rebound following 1.2 percent GDP growth in the first three months of the year.
Shobhana Chandra is a reporter for Bloomberg News.
