U.S. economic growth accelerates 2.6 pct in Q2

The BEA’s advanced estimates showed that the U.S. economy expanded 2.6 percent annualized in the second quarter of the year, coming in marginally below expectations of a 2.7 percent growth. Real personal consumption expenditures rose 2.8 percent, led by a 6.3 percent growth in durable goods spending. Spending on non-durable goods were up 3.8 percent, while spending on services was up a more moderate 1.9 percent.

Non-residential fixed investment was up 5.2 percent, driven by a 8.2 percent rise in equipment spending. Non-residential structures investment was up 4.9 percent, a drop from 14.8 percent in the first quarter as non-mining structures investment dropped 9.4 percent. Mining investment continued to underpin growth on rising drilling activity, rising by 117 percent, but still down from the 272 percent pace in the first quarter.

Net exports added marginally to the economic growth. Exports rose 4.1 percent, while imports grew 2.1 percent. Inventory investment was flat in the quarter. Benchmark revisions lowered the first quarter growth from 1.4 percent to 1.2 percent. Annual average growth last year was downwardly revised to 1.5 percent, while 2014 and 2015 were both upwardly revised. Overall, the positive revisions were greater than the downward ones and the American economy is 0.2 percent bigger than previously estimated.

As expected, the U.S. economic growth accelerated from its weak opening and is again running at a capacity-absorbing pace, noted TD Economics in a research report. Still, with the downward revision to the first quarter growth and 2.6 percent in the second quarter, economic growth would have to accelerate further in the second half of the year in order to hit the U.S. Fed’s median forecast for 2.2 percent.

“As long as economic growth continues to run above 2.0%, the focus will likely remain firmly on inflation, wage growth, and unemployment for guidance on future monetary policy”, said TD Economics.

At 17:00 GMT the FxWirePro's Hourly Strength Index of US Dollar was neutral at -30.0961. For more details on FxWirePro's Currency Strength Index, visit http://www.fxwirepro.com/currencyindex

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