Real GDP Grew by 2.6% in the Second Quarter


Second-quarter US GDP increase at an annualised rate of 2.6% from a revised reading of 1.2% the previous quarter which was previously reported at 1.4%.

But the number isn't almost strong enough to blow those headlines off the front pages.

Defense spending by the federal government had a banner quarter, rising at the fastest pace in six years at 5.2 percent, more than offsetting the drop in non-defense spending which sank 1.9 percent, the biggest loss since 2013.

This preliminary report, based on incomplete data, showed that GDP increased by 2.6%, and signaled that the growth slowdown in the first three months of this year was temporary.

USA trade relations with other countries, meanwhile, also gave a slight boost to second-quarter GDP.

President Trump has pledged to pursue policies to boost the U.S. economy, including cutting corporate and individual taxes, but has faced a Washington impasse.

"The worldwide experience and USA history would suggest that a sustained acceleration in annual growth of more than 1 percentage point is unlikely", the IMF said. Shares on Wall Street have retained those gains, but other measures of confidence have begun to drop following the long fight over health care.

Specifically, that metric went from 1.4% to 1.2%, while the Fed's favorite inflationary metric, core PCE, tumbled from a downward revised 1.8% to 0.9%.

Wall Street still expects some kind of tax-cut package to move through Congress by early next year.

Household outlays rose at a 2.8% pace, an improvement from the first quarter's 1.9%.

The increase reflected increased consumer spending, exports, and increased spending by both the federal government and businesses. "For consumers to continue to lead the economy we need wage growth to accelerate".

The US economy gathered speed in the second quarter of the year, growing at an annualised pace of 2.6%. In total, gross private domestic investment added 0.34 percentage points to the headline number, with positives from nonresidential fixed investment outweighing weaknesses in residential and inventories numbers.

Meanwhile, imports - which are subtracted from GDP calculations - increased and made a larger negative contribution due to the weaker dollar.