U.S. economic growth rate for second quarter revised sharply higher
WASHINGTON -- The American economy grew at a considerably faster pace in the second quarter than previously thought, as revisions showed stronger U.S. trade activity and business investments in nonresidential structures.
The Commerce Department said Thursday that the nation’s gross domestic product, or total economic output, expanded at an annual rate of 2.5% in the April-to-June period. That was up from GDP growth of 1.1% in the first quarter of the year and 0.1% in last year’s fourth quarter.
Initially, the government estimated the increase in second-quarter GDP at 1.7%. Much of the unusually large upward revision came from an adjustment in exports and imports. The report didn’t change the overall picture of an economy that is still growing at a modest rate but is picking up a bit as the drag from fiscal spending cuts fades.
Nonetheless, some analysts said the bigger-than-expected acceleration in GDP growth, along with low jobless claims, should give the Federal Reserve a little more confidence that the economy could absorb a reduction of the Fed’s monetary stimulus. Many economists and investors expect the central bank to make a small first cut in its $85 billion-a-month bond-buying program at its next policy meeting Sept. 17-18.
The Commerce Department report Thursday showed corporate profits bounced back in the second quarter, increasing by 3.9%, after falling by 1.3% in the first quarter.
Personal consumption, which accounts for about 70% of American economic activity, remains modest. It grew 1.8% at an annual rate in the second quarter, down from 2.5% in the first.
Many economists are expecting economic growth to strengthen in the second half of this year, figuring the effects of the government sequestration cuts will diminish and consumers will step up their spending, supported by gains in the housing market.
Even so, the rate of GDP growth suggests businesses won’t be ramping up hiring much very soon. Job growth this year has outpaced the overall economic performance, in part because of weak productivity gains, but net payroll gains remain moderate and have slowed a little in recent months.
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