Current US economic expansion cycle is the slowest on record

"The strength in the loonie gives reason for pause from the Bank of Canada and weak inflation numbers give them the room to be patient", said Nick Exarhos, economist at CIBC. That was an acceleration from the 1.9 percent pace in the first quarter.

There were few surprises; personal consumption, nonresidential investment, government and trade were all supportive of second quarter growth.

Stuart Hoffman, PNC senior economic adviser, said that "real consumer spending once again did the heavy lifting" in terms of economic growth. The economy grew 3.5 percent in the third quarter of 2016 before slowing down.

Trump's election and promises of massive tax cuts and infrastructure spending lifted expectations on Wall Street and among economists of faster growth.

Disposable personal income increased $122.1 billion, or 3.5 percent, in the second quarter, compared with an increase of $176.3 billion, or 5.1 percent, in the first quarter (revised). In the first quarter, real GDP increased 1.2 percent (revised).

Along those lines, durable goods spending was marginally negative in the first quarter with consumers more cautious, but jumped 6.3 percent at the annual rate in the second quarter. Exports rose 4.1% and imports edged up 2.1%.

A Labor Department report on Friday said its Employment Cost Index, which measures labour costs, increased 0.5% in the April to June period after growing 0.8% in the first quarter.

The U.S. central bank left rates unchanged on Wednesday and said it expected to start winding down its portfolio "relatively soon". The last time the economy showed year-on-year gains this strong was in late 2000, as the global tech bubble began to burst. The result was the best since October 2000 when the economy posted year-over-year growth of 4.7 per cent.

Companies such as Boeing, Facebook and Shell reported strong quarterly earnings this week.

"The worldwide experience and US history would suggest that a sustained acceleration in annual growth of more than 1 percentage point is unlikely", the IMF said. That stronger global environment, combined with recent weakness in the US dollar, is likely to help boost American exports in coming months. The increase in consumer spending was led by increases in housing and utilities, health care, and recreational goods and vehicles.

Vanessa Coleman