Canada grows at best pace in almost 6 years in second quarter

01 September, 2017, 01:53 | Author: Brian Mcdaniel
  • An increase in household spending helped drive GDP growth in Q2 according to Statistics Canada | Shutterstock

Wednesday's report showed consumer spending, which accounts for more than two-thirds of US economic output, rose at a 3.3% annual rate in the second quarter, up from an earlier estimate of 2.8%.

"Importantly, August's rise in sentiment suggests Canadians are willing to look past (1) the impact of higher borrowing costs following the BoC's July rate hike, (2) Toronto's housing correction, and (3) NAFTA uncertainty".

Overall, growth during the current expansion has averaged a little over 2% a year.

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That's the strongest growth since the first quarter of 2015.

President Donald Trump has promised to grow the GDP to 3% and higher, but economists have doubted this could actually happen due to an "ageing [sic] population and poor productivity growth".

From April to June, the expansion of the GDP of the United States is established at 3 % in an annualized and seasonally adjusted data, compared to +1.2% in the first quarter. "And while it was once again consumers in the driver's seat, another strong quarter of income growth meant that households were able to increase their savings rate a touch while still keeping their wallets open".

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The second quarter economic growth was mainly driven by consumers, as household spending grew 4.6 percent, helped by another quarter of strong spending on durable goods.

Trump is talking about the GDP number for the second quarter of 2017, which the Commerce Department on Wednesday announced it was revising upwards from its initial 2.6 percent to 3 percent.

At its halfway point, American GDP is up 2.1 percent which indicates two-tenths of a percentage point improvement from previous estimates.

During last year's campaign, Trump pledged to boost economic growth to 4 percent or better.

At 17:00 GMT the FxWirePro's Hourly Strength Index of Canadian Dollar was bullish at 77.196, while the FxWirePro's Hourly Strength Index of US Dollar was bullish at 99.9839. Both forecasting firm Macroeconomic Advisers and the Federal Reserve Bank of Atlanta's GDPNow model were predicting a third-quarter growth rate of 3.4% ahead of Wednesday's report. A hit like that would mostly be reversed in the year's final quarter as rebuilding efforts kicked in, he added. The report said 14 of 20 industrial sectors saw growth in June.

Analysts said the data - with an unusually large upward revision of four tenths from the GDP estimate published last month - show an economy on sturdy footing, enough to keep unemployment at the current low trend. Said Morgan Stanley economists Robert Rosener, Michael Dilmanian and Ellen Zenter via research notes. Second, businesses are starting to more aggressively spend on equipment.

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