Consumers probably spent enough last quarter to help US growth rebound from a tepid start of the year. The rest of the economy is giving less of a lift, and the pickup is unlikely to last.

Gross domestic product expanded at a 2.5% annualised rate from April to June, according to the median estimate in a Bloomberg survey ahead of figures due on Friday.

While that would be an improvement over the first quarter's 1.4%, some of the upswing owes to the dissipation of temporary factors such as low heating bills, delayed tax refunds and volatility in inventories.

Meanwhile, a gangbusters pace of business investment earlier in 2017 may have eased to a more sustainable rate.

It adds up to a first half where the economy looks much like it did in years past, growth of around 2%, with consumption doing the heavy lifting.

 

The pace is in line with that of the eight-year expansion, even though President Donald Trump's election victory had sent US consumer and business sentiment soaring on hopes that lawmakers would loosen regulation, lower taxes and boost infrastructure spending - moving growth toward Trump's 3% goal.

 

Now reality is setting in with some of the post-election bouyancy retreating amid Washington gridlock on health care and taxes.

 

While a solid job market has helped underpin growth, wage gains remain modest, and key measures such as auto sales and business-equipment orders have been slower than forecast in recent months. Economists see US growth easing back to around the average of this expansion following the second quarter.

 

"It's hard to become too optimistic when you're talking about an economy that's running at about 2%," said Michelle Meyer, head of US economics at Bank of America Corp in New York.

 

"There's very little chance for much accleration. Nonetheless, growth is ongoing. The unemployment rate has gone down, job growth is fairly steady and the consumer should continue to spend."

 

Consumer spending, which accounts for about 70% of GDP, probably accelerated to a 2.9% annualised pace of growth in the second quarter after a 1.1% rate in the prior period that was the weakest in almost four years, based on the median estimate of economists.

Source :
1) Bloomberg
2) www.thestar.com.my (Published on 28 July 2017)