Published: Thu, August 31, 2017
Money | By Oscar Reynolds

GDP revised up more than expected on stronger business and consumer spending

GDP revised up more than expected on stronger business and consumer spending

The quarter also saw a.21 percent increase net exports, meaning a shrinking trade deficit, another key Trump promise.

Bloomberg was projecting a gain of 2.8% in second-quarter GDP, and this 3.0% actual report was at the top of a 2.5% to 3.0% range in Bloomberg's Econoday forecast.

The result is a healthy upward revision from the government's initial estimate of 2.6% growth in the second quarter.

Paul Ashworth, chief USA economist at Capital Economics, said he believed that the strength in consumer spending should result in an "even stronger hand-off" for growth going into the current quarter.

GDP grew 1.2% in the January-March period.

Investment by businesses also improved to growth of 6.9 percent, reflecting higher spending on structures, equipment and intellectual property.

The Commerce Department issues its second look at the performance of the overall economy for the April-June quarter.

Against the euro, the dollar rose 0.3% to $1.1933 and gained 0.4 against Japan's yen to Y110.16.

"Underlying domestic demand in the economy is consistent with near three percent growth but the supply-side of the economy is not capable of delivering such a pace of growth at this point", John Ryding, chief economist at RDQ Economics in NY, told CNBC.

President Donald Trump had set a 3% target for long-term economic growth. That was up from the government's original estimate of a 1.9% gain.

"The revised GDP growth rate likely comes as a sigh of relief for folks looking for further confirmation that the US economy is moving along swiftly", says Mike Loewengart, investment strategist at Etrade. At the same time, private inventories stabilized in the second quarter but added just 0.02 percentage points to headline growth.

"Underlying domestic demand in the economy is consistent with near three percent growth but the supply-side of the economy is not capable of delivering such a pace of growth at this point", said John Ryding, chief economist at RDQ Economics in NY.

Strong growth and a labour market that is close to full employment would support the view that the US Federal Reserve will start unwinding its $4.2tn quantitative easing programme next month and hike interest rates again in December. Corporate pretax earnings rose 7 percent year to year; up 1.3 percent quarter to quarter.

Mark Zandi, chief economist at Moody's Analytics, forecasts annual growth of 2.1%.

Zandi is forecasting that growth in 2018 will be an even stronger 2.8 percent.

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