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Friday 24 January 2020

US economic growth revised up to 4.2% for the second quarter

Growth is trending higher in the world's largest economy this year, putting Trump's annual growth target of three percent within reach

Washington: The US economy grew at a faster pace than initially thought in the second quarter, according to revised figures. The Commerce Department’s second estimate for the April-June period put growth at an annualised 4.2%, slightly up from the previous figure of 4.1%.It was the best quarterly figure for nearly four years and put the economy on track to hit Donald Trump’s goal of 3% annual growth.

The figures helped send Wall Street to new highs on Wednesday. The S&P 500 and the Nasdaq indexes both hit new record highs for the fourth consecutive session, boosted by gains for technology companies such as Amazon and Alphabet.

The uptick in estimates of second quarter spending by companies was sure to comfort President Donald Trump and supporters of December’s sweeping corporate tax cuts who argue that lowering corporations’ tax burdens will spur investment and growth.

Gross Domestic Product advanced at an annual rate of 4.2% in the April-to-June period, a tenth of a point faster than initial estimates showed last month and still the fastest growth in almost four years, according to the Commerce Department.

Economists had been expecting a slight downward revision.

Many economists view the second quarter growth as a blip, juiced by one-off factors unlikely to be sustainable, and estimates for growth in the third quarter now hover around a still-robust three percent.

But Trump last month hailed the economy’s renewed vigor, claiming credit for boosting growth above all with tax cuts and by aggressively confronting trading partners.

Still, much of the second-quarter boom was due to a boost in exports as merchants raced to buy American goods principally soybeans and petroleum ahead of China’s retaliatory tariffs that took effect in July. The pendulum is expected to swing in the other direction in coming months.

Corporate profits rose $72.4 billion, up from $26.7 billion in the first quarter when many companies reported one-time accounting charges due to changes in the tax laws. Growth is trending higher in the world’s largest economy this year, putting Trump’s annual growth target of three percent within reach.

Much of the upward revision in spending by companies reflected investment in computer software, according to the department. Meanwhile, estimates for the value of imports, notably petroleum, fell and federal and local government spending moved up.

The new estimate was based on a more complete set of data than previously available and will be revised again next month.

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