U.S. Economic Growth Picks Up in Second Quarter, Wages Continue to Lag Top News


U.S. Economic Growth Picks Up in Second Quarter, Wages Continue to Lag Top News

Economists expect the Fed to announce a plan to start reducing its $4.2 trillion portfolio of Treasury bonds and mortgage-backed securities in September.

The U.S. central bank left rates unchanged on Wednesday and said it expected to start winding down its portfolio “relatively soon.”

The rise in second-quarter GDP was in line with economists’ expectations. The economy was previously reported to have grown at a 1.4 percent pace in the first quarter.

The economy grew 1.9 percent in the first half of 2017, making it unlikely that GDP would top 2.5 percent for the full year. President Donald Trump has set an ambitious 3.0 percent growth target for 2017.

While the Trump administration has vowed to cut corporate and individual taxes as part of its business-friendly agenda, Republicans’ struggles in Congress to pass a healthcare restructuring have left analysts skeptical on the prospects of fiscal stimulus. So far, the impasse in Washington has not hurt either business and consumer confidence.

A resurgence in consumer spending accounted for the bulk of the pickup in economic growth in the second quarter. Consumer spending, which makes up more than two-thirds of the U.S. economy, grew at a 2.8 percent rate. That was an acceleration from the 1.9 percent pace logged in the first quarter.

But with wage growth remaining sluggish despite the labor market being near full employment, there are concerns that consumer spending could slow in the third quarter.

In a separate report on Friday, the Labor Department said its Employment Cost Index, the broadest measure of labor costs, increased 0.5. percent in the April-June period after accelerating 0.8 percent in the first quarter. Annual wage growth has struggled to rise above 2.5 percent.

Inflation was subdued in the second quarter. The Fed’s preferred inflation measure, the personal consumption expenditures (PCE) price index excluding food and energy, increased at a 0.9 percent rate compared to 1.8 percent in the first quarter.


Business spending on equipment rose at a pace of 8.2 percent in the second quarter, the fastest since the third quarter of 2015. It was the third straight quarterly increase.

Spending on mining exploration, wells and shafts grew at a 116.7 percent rate, slowing from the first-quarter’s robust 272.1 percent pace. As a result, investment on nonresidential structures increased at a 4.9 percent pace, moderating from the January-March period’s brisk 14.8 percent rate.

Businesses continued to carefully manage their inventories in the second quarter but spent more in some places. Inventory investment was neutral to GDP growth after slicing 1.46 percentage points in the first quarter.

Trade added 0.18 percentage point to growth, contributing to output for a second straight quarter.

Housing was a drag on growth in the last quarter, with investment on homebuilding contracting at a 6.8 percent rate, the worst performance since the third quarter of 2010.

Alongside the second-quarter GDP report, the government published revisions to data going back to 2014, which showed little change in the growth picture.

(Reporting by Lucia Mutikani; Editing by Paul Simao)

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U.S. Economic Growth Picks Up in Second Quarter, Wages Continue to Lag Top News

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U.S. Economic Growth Picks Up in Second Quarter, Wages Continue to Lag Top News




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