9:40 AM, Aug 30, 2017 — The US economy grew more than earlier thought in the second quarter amid increases in consumer spending, according to the second estimate from the Department of Commerce .
Real gross domestic product growth was 3% in the three months ended June, faster than the advance estimate of 2.6% made last month and compared with the first-quarter pace of 1.2%, data from the department’s Bureau of Economic Affairs showed on Tuesday. Analysts polled by Econoday had projected second quarter growth of 2.8%.
“The revision to consumer spending was the highlight of this report, indicating that the consumer, helped along by strong job and income growth, has definitely woken up after the first quarter lull,” Michael Dolega, director and senior economist with TD Economics, said in a note.
Personal consumption expenditures, a measure of consumer spending on goods and services, rose 3.3% in the second quarter from 1.2% in the first three months of 2017, the BEA said. In the advance estimate, PCE was up 2.6%.
The report should “embolden Fed hawks to suggest additional rate rises,” Dolega said. “Still, the weak inflation figures remain a constraint at this point.”
Morgan Stanley lowered its third-quarter GDP tracking estimate to 2.5% from 2.7% after the better-than-expected revision, with the results implying “a bit less sequential growth,” according to a statement.
And the third quarter will likely face headwinds from Hurricane Harvey’s assault on the US Gulf Coast, according to TD Economics, which said the storm could slow GDP growth by between 0.1 and 0.4 percentage points.
“Both consumer spending and business investment are likely to sustain weaker performance as a result, but most of the drag is likely to come from net exports — with refined product exports hard hit given the outages of Gulf Coast refineries and ports shuttered,” Dolega said in the note.