The U.S. economy in the second quarter shrugged off its weak start to the year, reflecting a major boost from consumer spending.
In its advance estimate of growth, the Commerce Department said gross domestic product increased at an annual rate of 2.6% in the second quarter, compared to a revised rate of only 1.2% in the first quarter.
The second-quarter increase “reflected positive contributions from personal consumption expenditures, nonresidential fixed investment, exports, and federal government spending that were partly offset by negative contributions from private residential fixed investment, private inventory investment, and state and local government spending,” the department reported.
The growth rate still came up short of the 2.8% gain predicted by Wall Street analysts and the sustained 3%-plus expansion promised by President Donald Trump.
“In recent years, the U.S. economy has often started off slowly, improved in the middle of the year, only to sag again toward the end,” Politico said, citing the 3.5% jump in the third quarter of 2016.
“One strong quarter for Trump does not mean he is on track to deliver on his promise of sustained annual growth of more than 3 percent,” it added.
The latest GDP report showed that consumer spending, the largest source of the nation’s economic growth, rose 2.8% in the second quarter as Americans bought more groceries and clothes and paid more for health care.
But businesses increased fixed investment just 2.2% in the spring after a 8.1% gain in the first quarter, when, according to MarketWatch, enthusiasm for the new pro-business Trump administration may have triggered a jump in corporate spending.
Home builders also reduced spending by the most in seven years after piling money into new properties for two quarters in a row, with residential investment dropping 6.8%. Although demand is strong, builders “face an array of obstacles in constructing enough new homes to keep up, such as difficulty finding inexpensive lots or skilled workers,” MarketWatch said.
The economy is forecast to grow 2.7% in the third quarter. “The real economy remains in good shape,” said Andrew Hunter, U.S. economist at Capital Economics.