U.S.: Robust consumer spending drives GDP growth in Q2 - TD Bank Financial Group

ActionForex reports that analysts at TD Bank Financial Group discuss the Q2 U.S. GDP data.

"The U.S. economy expanded at a 6.5% annualized pace in the second quarter, below the median consensus estimate for 8.4%."

"Consumers were the key driver of domestic demand strength. Spending rallied 11.8%, following a 11.4% pace in Q1."

"Government spending, by contrast, pulled back in the second quarter, falling 1.5%. The outturn was heavily influenced by a decrease in federal government activity (-5.0%) while the state and local level flipped to expansion (+0.8%) after contracting in the first quarter."

"Nonresidential investment was up (+8.0%)... Residential investment pulled back in the second quarter falling 9.8% and subtracting 0.5 percentage points (ppts) from growth."

"Exports rose less than expected (6.0%) while imports were a bit stronger than anticipated, up 7.8% in Q2, so net exports still subtracted from growth (-0.4%-pts) compounding the drag from Q1."

"Finally, largely as expected, price pressures accelerated in the second quarter, with the core PCE deflator up 6.1% on an annualized quarter-over-quarter basis.'

"The American economy expanded at a brisk pace in the second quarter, though somewhat below lofty expectations. Growth was powered by the consumer while federal government expenditures, residential real estate investment and a drawdown in inventories acted as headwinds. Total economic activity is now slightly above (+0.8%) its pre-pandemic level as economic reopening and a receding virus has helped bring back a semblance of normalcy."

"The picture here is of an economy where healthy domestic demand is setting the tone for the expansion. However, as noted yesterday by the FOMC, the course of the recovery will be guided by the virus."