U.S. Economy Earns Raves for 2nd-Quarter Stats
Economic growth sped ahead in the spring at an even faster pace than previously thought while inflation moderated, a performance that led analysts to marvel.
Gross domestic product--the nation’s total output of goods and services and the broadest measure of economic health--grew at a 5.6% annual rate in the April-June quarter, the Commerce Department reported Thursday.
That beat the first quarter’s 4.8% rate and showed that the economy grew more strongly in the second quarter than the previously estimated rates of 5.3% and 5.2%.
“The economy in the second quarter was about as perfect as possible--robust growth and low inflation,” said Mark Zandi, chief economist at the economic consulting firm Economy.com. “The economy was picture-perfect before the revision and now is almost beyond words.”
The government’s final reading on the GDP, based on more data than previous calculations, was the best showing since the fourth quarter of last year. Many analysts expected growth would hold steady at the 5.3% rate estimated by the government last month.
In the current quarter, many analysts believe the economy has slowed to a growth rate of 3% to 3.5%.
Separately, the Labor Department said Thursday that a software glitch miscalculating housing costs caused inflation at the consumer level to be understated by one-tenth of a percentage point this year. It was the first revision in the overall consumer price index since 1974.
Inflation as measured by the CPI over the first eight months of this year rose at a seasonally adjusted annual rate of 3.5%, rather than the 3.4% originally published. Economists said the revisions will not have any material effect on the economy.
“They are not big enough to change the overall inflation picture significantly,” said Ian Shepherdson, chief economist at High Frequency Economics.
The CPI also is used to calculate cost-of-living adjustments in Social Security and other federal benefit payments, as well as in some private benefit plans.
The revision will add an average of 82 cents a month to retirees’ benefit checks in January, Social Security Administration spokeswoman Cathy Noe said.
The Treasury Department said the revision will not change interest payments for investors holding inflation-indexed savings bonds and securities.
Given more recent signs of moderating economic growth, many economists believe that the Fed, which has raised interest rates six times since June 1999, will leave them unchanged when policymakers meet Tuesday.
In the GDP report, consumer spending, which accounts for two-thirds of all economic activity, slowed in the second quarter. The increase of 3.1% was the slowest pace since the second quarter of 1997.
