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Rosy GDP report sets stage for strong second-half growth

01 September 2017

The Commerce Department said Wednesday that the economy had expanded at an annual rate of 3 percent in the second quarter of the year, better than initially estimated, and a substantial acceleration over the first quarter's lackluster 1.2 percent pace.

The u.s. economy has greatly accelerated its pace of growth in the second quarter, reaching the 3% target set by the us president, Donald Trump, even if this performance could be hard to maintain over time.

Within minutes of the report coming out, currency traders started upping the odds that the Bank of Canada will hike its benchmark interest rate when it meets next week.

The consumer, long a pillar of the economy, continued to boost growth, with household consumption rising by an annualized 4.6 percent as Canadians spent on vehicles.

The Canadian dollar gained nearly a full cent after the release of this data as well as USA unemployment rate figures.

It was a stronger showing than the 3.5- to 4-per-cent pace analysts had been expecting.

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.

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Private-sector estimates of third-quarter growth have also inched higher lately. Consumer spending is up 3.3 percent revised from its previous 2.8 percent and accounted for a bulk of the growth, whereas savings went down from 3.7 from 3.9 percent. He predicted GDP would grow close to 3 percent this quarter. It traded around 1.2650, rising on the renewed strength of the U.S. dollar and the tumbling down of oil prices.

Canadian government bond prices were mostly lower across the yield curve, with the two-year price down 7 Canadian cents to yield 1.275 per cent and the 10-year falling 13 Canadian cents to yield 1.851 per cent. The fastest-growing large economy, China's, grew 6.7 percent past year.

Anderson expects growth in the range of 3percent to 3.5 percent in the current quarter, but he said the hurricane could shave as much as 0.3 percentage point off that figure. GDP has averaged annual growth rates of just 2.2 percent in this recovery, which is now the third longest in USA history.

Jodi Taylor, chief financial officer at the Container Store Group Inc., said the retailer has seen solid growth in the higher-ticket portion of its business.

The report also showed strength in business investment. Fixed nonresidential investment rose at a 6.9% pace last quarter, up from an initial estimate of 5.2%, including stronger spending on software. Second, businesses are starting to more aggressively spend on equipment.

The pickup in business investment "reflects two important factors", said Stephen Stanley, chief economist at Amherst Pierpont Securities, in a note to clients.

Rosy GDP report sets stage for strong second-half growth