U.S. economy rebounds with 2.3% growth in Q2

The U.S. economy rebounded in the second quarter, with GDP growing by 2.3 per cent, according to the Commerce Department.

A surge in consumer spending and some recovery in the export sector, which was hard hit by a port strike early in 2015, helped spur U.S. growth. The 2.3 per cent estimate is the first of three such estimates the U.S. will make for the second quarter.

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The Commerce Department also revised GDP growth for the January to March period, saying the U.S. economy did not contract, but grew by a modest 0.6 per cent.

The strong numbers are a contrast to the trend in Canada, where the economy has contracted for at least four months and economists cannot agree whether we are in recession.

A rebound in the U.S. economy was supposed to help Canada grow, but the expected benefits of a lowlooniehave yet to materialize.

Rest of 2015 looks good

U.S. economists are hopeful about the rest of 2015, projecting overall GDP growth of three per cent.

Consumer spending grew by 2.9 per cent in the second quarter, with spending on durable goods particularly strong.

There was a disappointing 0.6 per cent drop in business investment, but first quarter investment was revised upwards. However, an advance look at exports this spring showed a deteriorating trade picture, as the high U.S. dollar is making imports cheaper and hurting exports.

On Wednesday, the Federal Reserve noted that the job market, housing and consumer spending have all improved. It is closely watching these measures, as well as inflation, as part of its plan to raise interest rates sometime later this year.

Although it kept the benchmark rate at the current low level on Wednesday, the Fed may be ready to move on rates as soon as September.

"The above-potential gain in GDP recorded in the second quarter, if sustained, is expected to return the Fed to tightening mode," Paul Ferley, an economist with RBC, said in a note to investors predicting a September rate increase.

"Our forecast assumes that solid job gains in July and August will provide strong support for this pace to be maintained going into the second half of 2015," he said.

This again contrasts with the Canadian trend, where the Bank of Canada cut its key rate earlier this month in the hope of stimulating economic growth and pushing down theloonie.