Second-Quarter GDP Growth Hits 3% Pace

Tammy Harvey
August 31, 2017

Real GDP represents the value of the production of goods and services in the economy and is adjusted for inflation.

USA economic growth in the second quarter was stronger than originally reported, reaching President Donald Trump's target amid robust consumer spending and business investment.

Corporate profits (after IVA and CCA) increased by $26.8bn (1.3%) in the second quarter after a decrease of $46.2bn (2.1%) in the first quarter. In the advance estimate, the increase in real GDP was 2.6 percent.

With more data available, the increase in second-quarter GDP reflected bigger contributions from personal spending, investment, exports, federal expenditure and private inventory investment, according to the BEA data.

The Department of Commerce will issue its third estimate for the second quarter September 28.

Consumers' increased willingness to spend and higher business investment prompted a sharp upward revision in United States gross domestic product (GDP). Much of the strength came from a sharp upward revision in spending on autos, which the government initially estimated as declining in the spring. "'GDP is down to 7 percent.' And I'm saying, 'We're hitting 1 percent'".

Ahead of Friday's publication of the monthly employment report and non-farm payrolls data, the ADP report on private payrolls showed that 237,000 jobs were added in August.

The economy picked up from a 1.2% rate in the first quarter. Even with the upward revision, the weak start to the year means that growth over the past six months has averaged 2.1%, the same modest pace seen for the recovery that began in mid-2009.

Spending by governments, which had grown 0.7 per cent in the initial estimate, was revised to a decline at a 0.3 per cent rate.

Growth at an annualised pace was 2.1% in the fourth quarter of 2016.

This came in much higher than the 185,000 forecast by analysts, and upped the ante on expectations for Friday's report, where forecasts now sit at 180,000 - which is close to the average monthly increase this year.

Analysts are looking for a pickup in activity for the second half of this year and an even faster growth in 2018 if Trump is successful in getting parts of his economic program passed by Congress.

The acceleration in spending also suggests that a so-called Trump bump - improved sentiment among consumers and more optimism among business leaders - may be translating into concrete actions like homeowners buying appliances and companies investing in software or equipment.

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