Consumer spending bolsters U.S. second-quarter growth
By Lucia Mutikani
WASHINGTON (Reuters) - U.S. economic growth accelerated in the second quarter as solid consumer spending offset the drag from weak business spending on equipment, suggesting a steady momentum that could bring the Federal Reserve closer to hiking interest rates this year.
Gross domestic product expanded at a 2.3 percent annual rate, the Commerce Department said on Thursday. First-quarter GDP, previously reported to have shrunk at a 0.2 percent pace, was revised up to show it rising at a 0.6 percent rate.
"This was a very constructive report and given the supportive domestic economic backdrop, we expect this positive momentum in activity to be sustained in the coming months, providing the Fed with the necessary justification to raise rates this year - perhaps as early as September," said Millan Mulraine, deputy chief economist at TD Securities in New York.
The revision to first-quarter growth reflected steps taken by the government to refine the seasonal adjustment for some components of GDP, which economists said left residual seasonality in the data, as well as new source data.
The report also showed a pick-up in inflation during the quarter, which economists say keeps the Fed on track for its first interest rate hike since 2006. The U.S. central bank on Wednesday described the economy as expanding "moderately" while upgrading its view of the labor market and saying housing had shown "additional" improvement.
A separate report from the Labor Department showed first-time applications for unemployment benefits increased 12,000 last week to a seasonally adjusted 267,000. However, claims remained near their cycle lows.
The dollar rose against a basket of currencies, while prices for U.S. Treasury debt were mixed. Stocks on Wall Street were trading lower.
The economy grew 1.5 percent in the first half compared to 1.9 percent during the same period in 2014. Though second-quarter GDP growth was a bit below economists' expectations for a 2.6 percent rate, the growth composition pointed to firming domestic fundamentals. Continued...