NEW YORK – Pickups in consumer and business-equipment spending powered a United States economic rebound in the second quarter, signaling the eight-year expansion is on track to be sustained, U.S. Commerce Department figures showed Friday in Washington.
Highlights of Second-Quarter GDP (First Estimate)
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Learn More- Gross domestic product rose at a 2.6 percent annualized rate from prior quarter (est. 2.7%); first-quarter growth revised to 1.2 percent from 1.4 percent.
- Consumer spending, the biggest part of the economy, grew 2.8 percent (matching est.) after 1.9 percent gain.
- Nonresidential fixed investment climbed 5.2 percent.
- Trade added to growth as exports rose faster than imports; inventories were slight drag.
Key Takeaways
The results confirm that the slowdown at the start of 2017 was temporary and show an economy growing in the first half at about a 1.9 percent rate, compared with the expansion’s 2.2 percent average pace through the end of 2016.
Consumer spending led the rebound last quarter, helped by a steady job market and household finances boosted by stock and home-equity gains. Disposable incomes, adjusted for inflation, posted the best back-to-back quarters since the first half of 2015.
Business investment in equipment rose at an 8.2 percent pace, the most in almost two years, signaling companies are optimistic about demand in the U.S. as well as in overseas markets. The overall pace of nonresidential investment eased from 7.2 percent amid a slowdown in the structures category that followed a boom in oil-and-gas wells in the prior period. Intellectual-property investment also slowed.
A particular weak spot last quarter was residential investment, which fell by the most since 2010 following a strong gain in the previous period. Builders are coping with a shortage of available labor and lots, and warm weather in the first quarter may have pulled forward some activity.
Price data in the report indicated that inflation moved away from the Federal Reserve’s 2 percent goal. Excluding food and energy, the Fed’s preferred price index, tied to personal spending, rose at a 0.9 percent annualized rate last quarter, matching the weakest gain since 2010.
Even so, the results are unlikely to deter Fed policy makers from implementing plans to begin shrinking their $4.5 trillion balance sheet in the coming months and continuing a gradual pace of interest-rate increases. Fed officials said in a statement Wednesday after their latest meeting that they still expect inflation to stabilize around their objective “over the medium term.”
Shobhana Chandra is a reporter for Bloomberg News.