WASHINGTON, July 27: The US economy accelerated to a 3.4 per cent growth rate in the second quarter, the government said on Friday, but analysts said the pace may not be sustained over the rest of the year.
In the first estimate of gross domestic product (GDP) for the period, the Commerce Department said growth picked up after a tepid 0.6 per cent rate, revised downward from 0.7 per cent, in the first quarter for the world’s biggest economy.
The 3.4 per cent second-quarter rate was the strongest since the first quarter of 2006 and slightly ahead of the average Wall Street estimate of 3.2 per cent.
Avery Shenfeld, senior economist at CIBC World Markets, said that the US economy is “neither as weak as it looked in the first quarter nor as strong as it appeared in the second quarter”.
“If you put the first two quarters together, you’re looking at growth of around two per cent, and that’s probably what the second half will look like.”
The higher growth rate came from an improving global trade picture, including higher exports, while consumer spending cooled.
Exports grew 6.4 per cent while imports fell 2.6 per cent, amid sharp declines in the US dollar.
Consumer spending, which accounts for two-thirds of economic activity, remained a driver of the expansion, but was a lesser factor. Spending increased just 1.3 per cent, the weakest since late 2005, compared with 3.7 per cent in the first quarter.
The housing slowdown was much less of a drag on the economy in the second quarter, as real residential fixed investment fell 9.3 per cent, not as steep as the 16.3 per cent drop in the first quarter.
“The big risk now is what kind of impact we have from housing in the second half of this year,” noted Drew Matus, economist at Lehman Brothers.
“Clearly the risks are that we get weaker housing than we were expecting.
However there is a possibility that we see inventory gains later in the year that could provide a partial offset ... we’re still on shaky ground in terms of growth of the US economy, but we’re not in danger of stalling.”—AFP