Economy beats expectations with 4.5% growth

US GDP Growth In Q2 Upwardly Revised By More Than Expected

Gross Domestic Product jumps in Q2

The rate surpassed analyst expectations, which called for an increase of 2.7 per cent.

The figure was revised up by an unusually-large four tenths from the growth estimate published last month, due to higher consumer spending and business investment than in the initial report. It marked the strongest quarter of growth since the first quarter of 2015.

However, history tells us that once rebuilding kicks in, the net impact of disasters on national GDP tends to be small and short-lived (even Katrina had no more than a fleeting effect on GDP growth), so we should still be on track for a solid economic performance through the rest of the year.

The Commerce Department said Wednesday that the economy had expanded at an annual rate of 3 percent in the second quarter of the year, better than initially estimated, and a substantial acceleration over the first quarter's lackluster 1.2 percent pace. That was far above economists' consensus forecast of 3.7 per cent for the April to June period.

Private-sector estimates of third-quarter growth have also inched higher lately.

For the entire year, Mark Zandi, chief economist at Moody's Analytics, is forecasting growth of 2.1 percent. But earnings began to recover a year ago as crude prices stabilized, and exporters are getting a boost because the dollar has weakened since early 2017.

That was ahead of both the 3.7% that economists were expecting and the 3% that was anticipated by the Bank of Canada.

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Research firm GfK reports that British consumers' mood improved in August, rising to -10 from July's one-year low at -12.

Combined with the 3.7% expansion over the first three months of 2017, Statistics Canada said the country saw its strongest six-month start to a calendar year in 15 years.

The economists expect that the hurricane Harvey, which is now hitting Texas and Louisiana, weighs in on the economic growth.

While consumer and business spending increased at a healthy pace in the first half of the year, inventories barely moved, an unusual development, as inventories usually rise in proportion to sales.

In fact, the underlying composition of activity in the spring in particular and first half of the year more generally is encouraging for the possibility of a pickup in growth going forward. The Bank of Canada had predicted second-quarter real GDP to expand by 3% in its latest forecast, released in July. Fourteen out of 20 major industries expanded during the month, DePratto noted, with the goods-producing side of the economy leading the way.

"Overall the US economy and labor market remain in good shape, and will easily withstand any temporary drag from Harvey", Gus Faucher, chief economist at PNC Financial, wrote in a report on Wednesday.

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