On Friday, July 28th the Commerce Department reported that the U.S. economy expanded in the second quarter at an inflation-adjusted annual rate of 2.6%. This is just 0.1 % below economic forecasts, indicating steady growth.
Second-quarter growth in GDP accelerated compared to a 1.2% pace reported in the first quarter. Some of the factors contributing to economic growth include consumer spending, real estate development, business growth, and the expansion of exports.
One of the main contributors to the improvement in economic growth during the second quarter was an increase in consumer spending. Personal-consumption increased at a 2.8% pace in the second quarter, up from a 1.9% gain in Q1. Consumers contributed to 1.93% of overall GDP. Furthermore, stronger spending correlates with a more confident U.S. consumer market. Consumer spending rose at an average annual rate of 3.2% from 2013 to 2016.
Real Estate Development
Unfortunately, home building and improvements spending fell in the second quarter by the most in nearly a decade. Fixed residential investment (structures and residential equipment) declined 6.8% during the second quarter, resulting in the biggest drop since the housing market crises in 2008. In Q1, residential investment rose by 11.1%.
U.S. business investment increased at a modest pace for the second straight quarter. Nonresidential fixed investment (capital expenses on real estate, tools, machinery, and factories) grew 5.2%. This is the best increase since 2014. These gains are a result of stabilizing commodity prices and thus increased mining exploration. Strong business spending suggests businesses are developing confidence in the longevity of U.S. economic expansion.
Exports on the Rise
International trade provided a humble boost to overall economic growth for the second straight quarter. Trade contributed to approximately 0.18% to the overall 2.6% GDP expansion in the second quarter. In the previous quarter, exports of U.S. goods and services exceeded that of imports of foreign products. Trade has been a drag on annual growth for the past three years. The strong growth in trade is an indication of good things to come from a weakening dollar, promoting U.S. business profits overseas.