US economy bounces back from weak first quarter

 
Jasper Jolly
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Consumer spending was one of the driving forces in the US economy (Source: Getty)

The giant US economy recovered some of the momentum it lost at the start of the year as the American consumer kicked into a higher gear.

US GDP grew by an annualised rate of 2.6 per cent in the second quarter, according to an early estimate by the US Bureau of Economic Analysis (BEA), broadly in line with expectations.

Growth in the previous quarter was even worse than previously thought: the BEA revised it to an increase of only 1.2 per cent, down from 1.4 per cent on the previous reading.

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The BEA also revised up growth in 2015 by 0.3 percentage points to 2.9 per cent, meaning the nation recorded the strongest growth since 2005 during that year. Total growth for 2016 was revised down by 0.1 percentage points, to only 1.5 per cent.

An increase in consumer spending was the biggest contributor to higher growth in the second quarter of 2017, with personal consumption expenditures accounting for 1.93 percentage points of the overall expansion.

Oliver Kolodseike, senior economist​ at the Centre for Economics and Business Research, said: "With unemployment ultra-low and the latest consumer confidence index from the US Conference Board reaching a near 16-year high, consumer spending should continue to support economic growth in the second half of the year."

The US economy has expanded for 13 successive quarters, with the last contraction coming at the start of 2014. However, growth at the start of 2017 raised alarm bells by slowing markedly. The latest figures show that slump may have been temporary.

Yet the US remains some way off from the four per cent expansion targeted by US President Donald Trump. The prospects for a boost from a government that campaigned on the platform of a de facto fiscal stimulus remain as far away as they were at the start of the year after repeated failures by the White House to successfully pass legislation.

On the monetary policy side the growth figures will lend support to the efforts of the US Federal Reserve to finally address its enormous balance sheet, after the central bank this week left policy unchanged.

Read more: Signs of a cooler US economy as Fed eyes normalisation

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