WASHINGTON • The US economy grew faster than initially thought in the second quarter on solid domestic demand, showing fairly strong momentum that could still allow the Federal Reserve to hike interest rates this year.
Gross domestic product expanded at a 3.7 per cent annual pace instead of the 2.3 per cent rate reported last month, the Commerce Department said yesterday in its second GDP estimate. The GDP report, which was released in the wake of a global stock market sell-off, should assure investors and cautious Fed officials that the US was in good shape to weather the growing strains in the world economy.
Underscoring the solid economic fundamentals, a measure of private domestic demand that excludes trade, inventories and government expenditures increased at a 3.3 per cent rate in the second quarter, instead of the previously reported 2.5 percent pace.
Consumer spending, which accounts for more than two-thirds of US economic activity, grew at a 3.1 per cent rate, rather than the 2.9 per cent pace reported last month. Consumer spending got off to a brisk start in the third quarter, with retail sales rising solidly in July.
A strong labour market, cheaper petrol and relatively higher house prices are boosting household wealth, helping to support consumer spending.