U.S. growth in Q2 upgraded to 3%

An auto carrier driver unloads a new Ram pickup truck in Gaithersburg Maryland

An auto carrier driver unloads a new Ram pickup truck in Gaithersburg Maryland

The government provides three estimates each quarter for GDP, the economy's total output of goods and services.

That was revised up from the 2.8 percent pace reported in July and accounted for the bulk of the pickup in economic growth in the second quarter.

Paul Ashworth, chief US economist at Capital Economics, said the strength in consumer spending should result in an "even stronger hand-off" for growth going into the current quarter.

Economists surveyed by MarketWatch expected a smaller upward revision in second-quarter GDP to a 2.8% rate. Personal consumption expenditures added 2.28 percentage points to top-line growth in the second quarter, up from 1.93 percent in the prior report.

The bureau will release its third estimate for the second quarter of 2017 on September 28. The downgrade reflects a 1.7% fall in spending by state and local governments. A separate report on Wednesday from the ADP Research Institute showed companies added more workers than forecast in August, a positive sign ahead of the Labor Department's monthly payrolls data due Friday. Fallout from Hurricane Harvey may also trim third-quarter growth, though reconstruction is likely to help expansion in the following period.

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The first look at corporate profits for the quarter also bodes well for business investment and for hiring, which has been robust so far this year. That was an improvement from the lackluster 1.2 percent rate in the first quarter. But growth in the first half of the year was just 2.1 per cent, still below the 2.2 per cent average recorded over the last three years.

The chief driver of second-quarter strength was consumer spending. Treasury Secretary Steven Mnuchin has said it will take up to two years for the economy to sustain this pace, while some economists have said the target is too high.

Investment on nonresidential structures increased at a 6.2 percent pace, rather than the previously reported 4.9 percent rate. His first budget, sent to Congress earlier this year, projects growth rates will climb to a sustained annual rate of 3%, a goal that many private economists believe is still too optimistic.

"Underlying domestic demand in the economy is consistent with near three percent growth but the supply-side of the economy is not capable of delivering such a pace of growth at this point", John Ryding, chief economist at RDQ Economics in NY, told CNBC.

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