Pedestrians walk past an American flag displayed outside of the New York Stock Exchange. Picture: BLOOMBERG/MICHAEL NAGLE
Pedestrians walk past an American flag displayed outside of the New York Stock Exchange. Picture: BLOOMBERG/MICHAEL NAGLE

Washington — The US economy gathered speed in the second quarter, more than doubling the growth pace of the first three months of the year as consumer and defence spending accelerated, according to data released on Friday.

GDP increased 2.6% in the April to June period, compared with 1.2% in the first quarter, the commerce department reported. Nonetheless, the preliminary result, which is calculated from incomplete data that will be revised in the coming months, portrayed an economy facing significant headwinds.

Forecasts had varied from 2.6% to 2.8%.

A widening trade gap as well as slowing housing sales, business inventories and spending by state and local governments, all weighed on growth, according to the commerce department.

The outcome for the second quarter and the downwardly revised growth in the first quarter, put growth in the first half of 2017 at 1.9%, above the 1.5% recorded last year and close to the economy’s long-term trend growth rate of 2%. The Trump administration has pledged to push the economy to 3% growth or higher — which officials say will pay for proposed deep tax cuts — but most economists says this is unrealistic.

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

Personal consumption spending jumped to 2.8% from 1.9% in the first quarter, and exports of services likewise blossomed, adding 6.5%, the largest quarterly gain in more than four years. But the contribution to growth from home buying had its biggest fall in nearly seven years, slipping 6.8%.

AFP

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