American economy grew 3% in April-June

Laura Christensen
September 1, 2017

Household spending and exports, particularly in the form of energy products, drove the increase in real gross domestic product, the agency said.

Zandi is forecasting that growth in 2018 will be an even stronger 2.8 percent. Increasing household income on the back of healthy job gains aided in underpinning growth, and was enough to bring the household savings rate slightly to 4.6 percent from first quarter's 4.3 percent.

Business investment spending has been a laggard through most of this expansion but appears to be perking up this year.

This was the second of three estimates the government will provide for second quarter growth. They had been initially estimated to be +2.8 percent. "The market seems convinced that the Bank of Canada will wait until October, but the September meeting is now more likely", says CIBC.

"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.

There are several reasons that his goal is probably far-fetched, namely the country's aging workforce and slower population growth than in the past.

Wednesday's report included the government's first estimate for profits at US corporations during the second quarter. It is established by an annualized and seasonally adjusted data, compared to +1.2% in the first quarter.

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Second-quarter profits were up 8.1% from a year earlier. "If we get a sustained growth of 3 %, this means 12 million new jobs and 10 000 billions of dollars of added economic activity for the next decade".

The U.S. dollar softened against a basket of currencies following lackluster U.S. economic data that failed to boost expectations for another Federal Reserve rate increase this year. The Commerce Department also discovered in a separate earnings measure that "pretax profits with inventory valuation and capital consumption adjustments, rose 1.3% last quarter after falling 2.1% in the first three months of 2017, and was up 7% over the past year".

Yet the US economy is looking healthy anyway, especially on the jobs front. "All of those things weighed on US growth". Chief Executive Robert Niblock told analysts last week.

The surge in consumer spending stands in stark contrast to the problems plaguing brick-and-mortar stores like Sears and Macy's, which have been forced to close dozens of locations this year amid fierce competition from online retailers, like Amazon.com.

That was ahead of both the 3.7% that economists were expecting and the 3% that was anticipated by the Bank of Canada. The report said 14 of 20 industrial sectors saw growth in June.

Spending by governments, which had grown 0.7 percent in the initial estimate, was revised to a decline at a 0.3 percent rate. The GDP report sent it all the way to 1.2575.

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