Economy

Economic growth blows past expectations in May, powered by energy industry

Economic growth blows past expectations in May, powered by energy industry

It was nice comeback from the tepid 1.2 percent annual growth rate of the first quarter and more in line with the turbo-charged growth of 3 percent that has been promised by the Trump administration.

"The strength in the loonie gives reason for pause from the Bank of Canada and weak inflation numbers give them the room to be patient", said Nick Exarhos, economist at CIBC. Personal saving as a percent of disposable personal income was 3.8% in the second quarter, compared with 3.9% in the first quarter.

Household outlays rose at a 2.8% pace, an improvement from the first quarter's 1.9%.

The latest growth figures suggest the Federal Reserve could still raise interest rates later this year, which would be the third increase in 2017.

On Monday, the International Monetary Fund lowered its estimate of how fast the USA economy would grow in coming years, saying that it looked less likely that US policy would stimulate the economy than the IMF projected in April.

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Economists had expected growth to rebound from a weaker reading in the first quarter, which is typically lower due to seasonal problems with measurement. However, most economists wouldn't attribute the growth to the president's policies, since not much has been implemented yet. That stronger global environment, combined with recent weakness in the USA dollar, is likely to help boost American exports in coming months.

The BEA also revised up growth in 2015 by 0.3 percentage points to 2.9 per cent, meaning the nation recorded the strongest growth since 2005 during that year.

The Canadian dollar added to gains against the greenback immediately after the report, while traders increased their bets of another interest rate hike from the Bank of Canada, which earlier this month raised rates for the first time in almost seven years.

The economy grew 2.6 percent in the second quarter of 2017, slightly better than the average of 2.1 percent over the past four years. It's a positive sign that Americans are opening up their wallets, especially since consumer spending makes up about 70 percent of the economy. Output increased 2.6%, which matched Econoday.com's consensus forecast. PCE's contribution to GDP picked up to 1.93 percentage points from 1.32 in Q1. Goods exports increased by 2.8 percent in the second quarter, with goods imports up by 2.0 percent. Companies increased investment in equipment such as computers by 8.2%, though spending on structures such as oil rigs and offices grew more slowly.