Economy grows 2.3% in spring; 1st quarter revised higher

The U.S. economy rebounded this spring with annualized growth of 2.3%, and new data indicated that there was no contraction in the first quarter after all, the Commerce Department said Thursday.

The modest second-quarter figure -- the first of three estimates by the government -- fell short of economists’ forecasts of 2.9% annualized growth.

But that disappointment was partly offset by a significant upward revision to first-quarter growth.

Total economic output, also known as gross domestic product, increased at a 0.6% annualized rate from January through March, the Commerce Department said in its final estimate for the quarter.

That was a major improvement from the 0.2% annualized contraction in a report last month.

Taken together, the new data indicate that the economy expanded at about a 1.5% annual rate in the first half of the year. The weak performance is well below the economy’s potential and worse than last year’s tepid 1.9% first half growth.

Economists said unusually bad winter weather and a labor dispute at West Coast ports slowed first-quarter growth this year. However, the hit was not nearly as bad as initially believed.

The Commerce Department first estimated that the economy contracted at a 0.7% annual rate in the first quarter, a figure that now has been revised upward twice.

Noting other first-quarter slowdowns in recent years, some analysts suggested that there were problems with the Commerce Department’s seasonal adjustments.

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On Thursday, as part of its annual revisions of data, the department’s Bureau of Economic Analysis said it was introducing new seasonal adjustment methods for key inputs such as federal defense spending and consumer spending on services.

The revisions also showed that growth was weaker from 2011-2014 than originally reported.

The economy expanded at an average annual rate of 2% during that period, down from an earlier estimate of 2.3%.

The improved growth in this year’s second quarter was fueled by an increase in exports, consumer purchases and spending by state and local governments.

Exports, which have been hurt by a rising dollar, increased 5.3% from April through June after they had plunged 6% in the first quarter.

Consumer spending rose 2.9% in the second quarter, up from a weak 1.8% rise in the previous quarter, and state and local governments increased their spending by 2% after a 0.8% decrease in the first quarter.

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