U.S. economy rebounds to 2.6% growth in Q2


Stronger consumer spending accelerated the USA economy in the second quarter, according to the Commerce Department's first estimate of gross domestic product released Friday.

The International Monetary Fund (IMF) also said on Thursday that it expected the US economy to grow at 2.1 percent this year and next, supported by solid consumption growth and a rebound in investment.

The US economy accelerated in the second quarter as consumers ramped up spending and businesses invested more on equipment, confirming that the sluggish performance early in the year was temporary.

The faster pace of expansion was driven by 2.8 per cent annual growth in consumer spending, up from a 1.1 per cent rate of growth in the first quarter.

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Alongside the second-quarter GDP report, the government will publish revisions to data going back to 2014, including the first-quarter GDP estimate.

The economy also benefited far more modest inventory reductions, which was a big drag on first quarter growth. The Commerce Department will release its advance second-quarter GDP estimate on Friday at 8:30 a.m. EDT.

Despite the economic upswing, the rates of both personal income and personal savings slowed in the second quarter as compared to the first three months of the year.

The showing marked an improvement over the 1.2% growth pace recorded in the first quarter. Consumer spending rose 2.8%, and business spending went up 5.2%.

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Business investment in equipment rose at an 8.2 per cent pace, the most in nearly two years, signaling companies are optimistic about demand in the USA as well as in overseas markets. Economists had expected an increase of 0.2 per cent, according to Thomson Reuters. 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.

The dollar fell against a basket of currencies after the release of the data, while prices for U.S. government bonds rose.

Inflation eased. The price index for personal consumption expenditures-the Fed's preferred inflation gauge-rose at a rate of 0.3% in the second quarter.

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