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USA growth is thought to have rebounded in April-June quarter

Personal-consumption growth in the second quarter jumped to 4.2% from 1.5%, showing that spending remained an important driver of economic growth.

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Gross domestic product increased at a 1.2 per cent annual rate after rising by a downwardly revised 0.8 per cent pace in the first quarter, the Commerce Department said on Friday.

As it does every summer, the government also revised GDP figures for the past three years to take into account new information and improvements in how the report is calculated. Per the first (of three) calculations, the GDP only grew 1.2% in Q2, falling short of the expected pace of 2.5% GDP growth.

The growth in the second quarter was far below the market expectation of over 2 percent.

“It is incredible how resilient the US economy has been in the face of all these uncertainties and shocks”, said Zandi.

“In the past, those developments have even led to recessions, but given that potential growth is slower these days and that other headwinds occurred at the same time, one may actually be tempted to highlight the economy’s resilience”. That left the year-over-year growth rate at 1.2 percent, the weakest in nearly three years. The figure was well below the 2.6% growth economists had forecast.

The Federal Reserve, which voted to keep interest rates on hold this week, noted that the USA economy was improving.

After a string of solid economic numbers from the US and geopolitical tensions abating, the Federal Reserve signaled that an interest rate hike in 2016 was a possibility at its monetary policy meeting on Wednesday, but after todays report odds of a hike have fallen sharply. Manufacturers especially have been challenged by a strong dollar, which makes U.S.-made goods more expensive overseas. Overall consumer spending, which includes goods and services, expanded by 4.2 percent in this report, and the category contributed 2.83 percentage points to headline growth.

The robust economic rebound, he says, relies on strong consumer spending, which has slowed somewhat based on recent data, he says. Real disposable income, which is income after deducting taxes but adjusted for inflation, rose 1.2% in the second quarter, compared to an increase of 2.2% in the first quarter. Investment in new housing tumbled 6.1% in the second quarter, but only after a big gain early the year when mild weather allowed builders to accelerate work during the winter.

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“We’re just muddling through”, said Joseph LaVorgna, chief USA economist at Deutsche Bank Securities in NY, who had forecast a 1 per cent gain in second-quarter GDP.

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