GDP Growth Rebounds in 2Q, Consumer Spending Up

Looks like the United States economy may be picking up steam.

Numbers from the Commerce Department on Friday showed that gross domestic product gathered momentum after previously weak data.  For the second quarter of the year, the economy grew by 2.6 percent as measured on an annualized basis.

Though much better than the 1.2 percent pace of the first quarter’s revised numbers, the Associated Press noted that the newest numbers were still below the 4 percent plus rate that has been touted as a goal by the Trump administration, with the purported tailwinds in place of tax cuts and regulatory rollbacks.

Amid the data, consumer spending stood out.  The pickup in GDP growth was buoyed as consumer spending grew at 2.8 percent, up from 1.9 percent in the first quarter.  As has been widely noted, and as the AP reported, consumer spending is a key driver of economic growth, as it accounts for 70 percent of all activity. Business investment was also up, with 5.2 percent growth in plant and equipment investment.

The trade deficit continued to decline, and also helped push GDP growth, by as much 20 basis points. As has been seen before, government spending – especially in defense – grew, too, up 70 basis points.

The 2.6 percent growth provides some respite from tepid performance and is the highest rate since late last year. And yet, as AP stated, analyst consensus for GDP growth stands at 2.2 percent, which again is quite a bit below targets that have been put in place by U.S, officials, largely as some promised legislation – especially, for example, in infrastructure spending, have yet to be passed or even considered for passage by Congress.

This is the first reading of second-quarter activity, which is subject to revision.