US Second-Quarter Growth Revised to 3% in Momentum Boost

Sep 01, 2017, 01:53
US Second-Quarter Growth Revised to 3% in Momentum Boost

The U.S. economy picked up steam during the second quarter, notching the fastest pace of growth in two years.

The central bank has raised interest rates twice this year but some market players doubt the Fed will hike a third time by December in light of persistently weak inflation.

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.

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Indeed, the economy's overall growth in June was also ahead of forecasts, with a 0.3 per cent gain compared to May.

"It is the best quarter since the first quarter of 2015", said Mickey Levy, at Berenberg.

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"Even as we see daylight in today's economy, we find ourselves in the shadow of daunting longer-term challenges to economic growth and shared prosperity", said John Williams, president of the Federal Reserve Bank of San Francisco, in an August 2 speech. The data also shows the last time quarterly growth climbed as high as 4.5% was in the third quarter of 2011 when it hit 5.7%.

Mark Zandi, chief economist at Moody's Analytics, said he expected growth for the current quarter of 2.9 percent and a 2.6 percent gain for the fourth quarter.

In the year to June, Canada's economy grew 4.3 per cent, after growing 4.7 per cent the month before.

The first quarter's growth was unrevised at 3.7%.

The central bank's policy rate sits at 0.75 per cent, after it was raised in July for the first time in almost seven years.

The second quarter economic growth was mainly driven by consumers, as household spending grew 4.6 percent, helped by another quarter of strong spending on durable goods.

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GDP growth tends to be volatile from quarter to quarter. But earnings began to recover previous year as crude prices stabilized, and exporters are getting a boost because the dollar has weakened since early 2017.

The Canadian dollar strengthened against the USA dollar and traders raised bets for another 25-basis-point rate hike that could come as soon as next month.

Combined with the 3.7 per cent expansion over the first three months of 2017, Statistics Canada said the country saw its strongest six-month start to a calendar year in 15 years.

Many economists had been forecasting growth in the current July-September quarter would be around 3 percent.

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. Some are now saying that the devastation from Hurricane Harvey could shave about a half-percentage point off growth this quarter.

Canadian government bond prices were mostly lower across the yield curve, with the two-year price down 7 Canadian cents to yield 1.275 per cent and the 10-year falling 13 Canadian cents to yield 1.851 per cent.

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