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U.S. economy grows 3% in Q2, its fastest pace in 2 years

U.S. economy grows 3% in Q2, its fastest pace in 2 years

WASHINGTON: The U.S. economy rebounded sharply in the spring, growing at the fastest pace in more than two years amid brisk consumer spending on autos and other goods. The gross domestic product, the broadest measure of economic health, grew at an annual rate of 3 percent in the April-June quarter, the Commerce Department reported Wednesday. It was the best showing since a 3.2 percent gain in the first quarter of 2015. The result is a healthy upward revision from the government’s initial estimate of 2.6 percent growth in the second quarter. The growth rate in the January-March quarter was a lackluster 1.2 percent. Paul Ashworth, chief U.S. economist at Capital Economics, said he believed that the strength in consumer spending should result in an “even stronger hand-off” for growth going into the current quarter. He predicted GDP would grow close to 3 percent this quarter.

President Donald Trump hailed the latest figures, declaring “we are really on our way.” Trump said if the economy is able to sustain growth at a 3 percent rate, it would create 12 million new jobs and $10 trillion in new economic activity over the next decade. “I happen to be one that thinks we can go much higher than 3 percent. There is no reason why we shouldn’t,” Trump told a crowd in Missouri where he was campaigning for support for the administration’s tax plan that would cut rates for individuals and businesses. During last year’s campaign, Trump pledged to boost economic growth to 4 percent or better. The budget the president released in May projects GDP growth will rise to 3 percent over the next four years and remain at that level for the rest of the decade. However, private economists and the nonpartisan Congressional Budget Office believe that forecast is unrealistic. CBO is forecasting average growth of just 1.9 percent over the next decade.

For the second quarter, the government estimated that consumer spending grew at a 3.3 percent rate, the best showing in a year and up from an initial estimate of 2.8 percent growth. Much of the strength came from a sharp upward revision in spending on autos, which the government initially estimated as declining in the spring. Investment by businesses also improved to growth of 6.9 percent, reflecting higher spending on structures, equipment and intellectual property. Spending by governments, which had grown 0.7 percent in the initial estimate, was revised to a decline at a 0.3 percent rate. The downgrade reflects a 1.7 percent fall in spending by state and local governments.