World Economy

US Economy to Rebound in Q2

US Economy to Rebound in Q2
US Economy to Rebound in Q2

US economic growth is set to rebound in the second quarter, but a strong dollar could slow momentum and push the first interest rate hike from the Federal Reserve to later this year, a Reuters poll found.

The survey of 85 economists forecast gross domestic product expanding at a 3.1 percent annual pace in the second quarter. That compared to a 3.0 percent pace forecast in March and left the growth estimate for 2015 at 2.8 percent.

Growth estimates for the first quarter were slashed to a 1.2 percent pace from 2.3 percent. The government will publish its snapshot of first-quarter GDP next Wednesday.

Consumer spending is seen driving growth in the second quarter, with households expected to deploy some of the massive savings accumulated from cheaper gasoline in late 2014 and at the start of the year. Savings are at a more than two-year high.

"Consumers have an enormous windfall to spend from lower gasoline prices," said Ryan Sweet, a senior economist at Moody's Analytics in West Chester, Pennsylvania.

Growth slowed down sharply at the start of 2015 as the economy was slammed by harsh winter weather, weak global demand and a now-settled labor dispute at West Coast ports. Activity was also constrained by the dollar as well as lower energy prices, which have hurt corporate profits.

While there are signs a recovery is underway, March data on employment, retail sales, housing starts and manufacturing suggest it could lack the vigor experienced last year when growth snapped back from a cold weather-induced slump.

"The slow momentum will likely complicate the case of a June rate hike," said Millan Mulraine, deputy chief economist at TD Securities in New York. "We see September as the earliest point at which conditions will provide the necessary confidence in the sustainability of the economic recovery."