United States: U.S. GDP boasts healthy growth in Q2
July 28, 2017
GDP expanded at a seasonally-adjusted annualized rate (SAAR) of 2.6% in the second quarter of the year, according to a first estimate released by the Bureau of Economic Analysis (BEA) on 28 July, just shy of market expectations of 2.8%. The reading was more than double Q1’s revised 1.2% expansion (previously reported: +1.4% SAAR) and was due to strong consumer spending and increased business investment in equipment. A year-on-year comparison showed that GDP increased 2.1% in the second quarter of 2017, which was a notch above the previous quarter’s 2.0% expansion.
The strong performance among U.S. households was supported by a steady job market and solid growth in disposable income. Personal consumption expenditure grew 2.8% in seasonally-adjusted annualized terms in the second quarter, an improvement over the 1.9% expansion seen in the previous quarter. Non-residential investment also made healthy gains this quarter as business equipment accelerated to a nearly two-year high, demonstrating firms’ confidence in domestic demand as well as optimism about the overall global economic recovery. Conversely, residential investment growth took a hit in Q2, decreasing 6.8% (Q1: +11.1% SAAR). Government expenditure rebounded modestly compared with the previous quarter and added slightly to growth.
Apart from consumer spending and business investment, the bright spot in this quarter’s report was the performance of the external sector. Exports grew 4.1% in the second quarter, a slight easing from the first quarter’s 7.3% gains, but a healthy result nonetheless. Aided by a deceleration in imports growth (Q1 2017: +4.3% SAAR; Q2 2017: +2.1% SAAR), the net contribution of the external sector to overall growth remained constant at a 0.2 percentage-point contribution in Q2.
Looking into the second half of the year, there are several bright spots on the horizon, with strong employment levels, buoyant business and consumer sentiment and growing domestic demand all pointing to future growth and productivity. In addition, a flat contribution from inventories this quarter—against market expectations of a solid rebound following Q1’s slump—could potentially see an additional boost to growth in Q3.
Author: Lindsey Ice, Economist