U.S. economy bounces back from weak first quarter

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Many economists expect the central bank will wait until October so as not to shock the economy with a rapid rise in borrowing costs, given the recent rise in the Canadian dollar which makes exporters less competitive. For this year, many analysts believe growth will come in around 2.2 percent, essentially where growth has been since the recovery began in mid-2009.

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. In addition, it revised first quarter growth down from 1.4 percent to 1.2 percent.

But with wage growth remaining sluggish despite the labour market being near full employment, there are concerns that consumer spending could slow in the third quarter.

The U.S. economy bounced back to decent 2.6 percent growth in the second quarter, offering a modestly positive headline for President Donald Trump after a stinging loss on health care and fresh turmoil inside the West Wing.

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A rebound in growth, together with a tightening labor market, would leave the Federal Reserve on course to announce a plan to start reducing its $4.2 trillion portfolio of Treasury bonds and mortgage-backed securities in September as well as raise interest rates for a third time this year. Overall, personal spending contributed 1.93 percentage points to the top-line growth figure of 2.6 percent, including 1.02 percent from goods spending. Goods exports increased by 2.8 percent in the second quarter, with goods imports up by 2.0 percent. Also, revisions to 2015 showed that year up higher than originally reported, whereas 2016 was lower than first thought.

The pick-up was helped by consumer spending in the quarter expanding at a pace of 2.8%, and businesses stepping up spending on equipment.

Personal consumption expenditure increased 2.8% for the quarter from an upwardly-revised 1.9% for the first quarter.

While businesses probably continued to carefully manage their inventories, they appeared to spend more in some places.

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Trade added 0.18 percentage point to growth, contributing to output for a second straight quarter.

But exports expanded at just a 4.1 per cent clip in the second quarter, compared to 7 per cent growth between January and March.

But the contribution to growth from home buying had its biggest fall in almost seven years, slipping 6.8 percent.

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