Second-quarter
GDP seen rebounding on consumer spending, housing
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[July 30, 2015]
By Lucia Mutikani
WASHINGTON (Reuters) - U.S. economic
growth likely accelerated in the second quarter as a pick-up in consumer
spending and housing offset the drag from trade and the energy sector,
suggesting a steady momentum that could bring the Federal Reserve closer
to hiking interest rates this year.
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The government is expected to report on Thursday that gross
domestic product increased at a 2.6 percent annual rate, according
to a Reuters survey of economists.
There is, however, a lot of uncertainty regarding this estimate
after the government took steps to refine the seasonal adjustment
for some components of GDP, which economists said left residual
seasonality in the data. This means first-quarter GDP, previously
reported to have shrunk at a 0.2 percent pace, could be revised
higher because of new source data.
"We expect a decent bounce back, which will suggest that the
economy's struggles at the start of the year were temporary," said
Ryan Sweet, a senior economist at Moody's Analytics in West Chester,
Pennsylvania. "GDP growth north of 2.5 percent is sufficient to
reduce the slack in the broader economy."
The Commerce Department will publish its GDP report at 8:30 a.m.
The Fed on Wednesday described the economy as expanding "moderately"
while upgrading its view of the labor market and saying housing had
shown "additional" improvement. The Fed's assessment left the door
open for a possible hike in interest rates in September, which would
be the first rise since 2006.
![](http://archives.lincolndailynews.com/2015/Jul/30/images/ads/current/best_friends_sda_010515.png) CONSUMER BOOST
Growth in the second quarter was probably boosted by consumer
spending as households used some of the windfall from cheaper
gasoline in late 2014 and early this year to go shopping. The
strengthening labor market also likely encouraged consumers to
loosen their purse strings.
Consumer spending, which accounts for more than two-thirds of U.S.
economic activity, is forecast to have grown around a 2.9 percent
rate from a 2.1 percent pace in the first quarter.
"The upshift in growth momentum should be sustained during the
second half of the year," said Millan Mulraine, deputy chief
economist at TD Securities in New York. "This will provide the
necessary cover for the Fed to raise rates later this year, though
the pace of tightening will be 'gradual.'"
A firming housing market is also expected to have supported the
economy in the second quarter, as did government spending.
However, the energy sector probably continued to weigh on growth as
it struggles with the lingering effects of deep spending by
oil-field companies like Schlumberger <SLB.N> and Halliburton
<HAL.N> in the aftermath of a more than 60 percent plunge in crude
oil prices last year.
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But there are signs that the energy spending rout might be nearing
an end. Data last Friday showed U.S. energy firms added 21 oil rigs
last week, marking the third increase over the past 33 weeks.
Schlumberger said last week it believed the North American rig count
may be bottoming and that a slow rise in both land drilling and
completion activity could occur in the second half of the year.
A strong dollar likely continued to hobble exports in the second
quarter, while sucking in imports to meet a pickup in domestic
demand. That is expected to have resulted in a trade deficit that
subtracted from GDP growth. Trade chopped off 1.89 percentage points
from GDP growth in the first quarter.
Inventory accumulation is expected to have slowed after the first
quarter's brisk pace. While that means inventories will subtract
from second-quarter GDP growth, that will be good news for the
remainder of the year.
With oil prices having risen during the second-quarter and consumer
spending having picked up, inflation pressures likely accelerated.
The personal consumption expenditures price index is forecast to
have rebounded at a 2.0 percent rate after falling by the same
margin in the first quarter.
Excluding food and energy, prices likely rose at a 1.6 percent pace.
(Reporting by Lucia Mutikani; Editing by Leslie Adler)
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