U.S. economy rebounds to strongest growth since 2015

Americans opened their wallets this spring, giving the economy its strongest boost in two years. 

The Commerce Department said the gross domestic product, the broadest measure of economic health, grew at an annual rate of 3 percent in the April-June quarter. It was the best showing since a 3.2 percent gain in the first quarter of 2015. 

The result is a healthy upward revision from the government's initial estimate of 2.6 percent growth in the second quarter. The growth rate in the January-March quarter was a lackluster 1.2 percent.

Yet that growth still falls short of President Trump's goal for sustained growth of 4 percent. His target may prove even harder to hit in the second half of 2017 given the economic impact of Hurricane Harvey, which has left a trail of destruction across Houston and southern Texas. The storm could lower economic growth by as much as 0.3 percentage points, lowering third-quarter GDP growth to 2.5 percent, according to Oxford Economics. 

"The drag to economic activity will come mainly through permanent losses in economic output," wrote Oxford economists Oren Klachkin and Gregory Daco in a Wednesday research note. "Businesses across most of Southeast Texas are closed and consumers are shuttered in their homes, or shelters. Neither are likely to 'make up' for lost spending once the storm passes."

Insurance won't cover all the costs of reconstruction, they added. Some businesses and homeowners may decide against reconstructing their properties, and insurance companies will face lower profits as they pay out on claims, they added. 

Still, not all economists agreed with that assessment. Harvey's impact will be "minimal," wrote Paul Ashworth, chief U.S. economist at Capital Economics.

"We might see a small uptick in initial jobless claims in early September and a very modest adverse impact on employment, industrial production and retail sales that is quickly reversed in the following months," he wrote in the Wednesday research note. 

Second-quarter growth was fueled by improvements in consumer spending, particularly on autos, and business investment. Those revisions offset a bigger drag from spending by state and local governments.