U.S. Economy Grew at a Revised 1.3% Pace Last Quarter, More Than Estimated
The U.S. economy grew at a 1.3 percent pace in the second quarter, faster than estimated last month and helped by exports and spending on services.
The revised rise in gross domestic product compares with a 1 percent gain previously calculated, Commerce Department figures showed today in Washington. The median forecast of economists surveyed by Bloomberg News was 1.2 percent, following a 0.4 percent increase in the first three months of the year.
Slower global markets may limit growth in exports and business spending, which has bolstered U.S. manufacturing, a pillar of the expansion. The lack of hiring and depressed consumer confidence add to concerns the economy is facing “significant” risks, helping explain why Federal Reserve policy makers took another step this month to revive the recovery.
“The third quarter did get off to a better start but there’s been a loss of momentum in the economy,” said Jim O’Sullivan, chief economist at MF Global Inc. in New York, who correctly forecast second-quarter GDP. “With consumer confidence down and equity markets down, the best hope is sluggish growth for the next few months.”
GDP projections of 80 economists in the survey ranged from 1 percent to 1.5 percent. The government’s GDP estimate is the third and final one for the quarter.
Jobless claims fell more than forecast last week as an atypical calendar alignment made it more difficult for the government to adjust the data for seasonal variations, another report showed. Applications for benefits dropped by 37,000 to 391,000, the fewest since April, the Labor Department said. An agency official said the data probably reflected a “slight mistiming” in the seasonal factors used to modify the figures.
Stock-index futures maintained gains after the reports, with the contract on the Standard & Poor’s 500 Index expiring in December climbing 1.4 percent to 1,164.6 at 8:57 a.m. in New York.
The revision also reflected a faster pace of investment in non-residential construction projects. State and local government spending held back the advance in GDP.
Consumer spending rose at a 0.7 percent annual pace, up from a previously reported 0.4 percent gain. Household purchases in the first quarter climbed at a 2.1 percent annual pace.
The gap between exports and imports narrowed, helping to add 0.24 percentage point to growth last quarter, up from a previous estimate of a 0.09-point contribution.
Business investment in equipment and software rose at a 6.2 percent annual rate compared with a previous estimate of 7.9 percent and following an 8.7 percent pace in the first three months of the year.
Inventories subtracted more from second-quarter growth than reported last month -- 0.28 percentage point versus 0.23 percentage point.
The Fed’s preferred price gauge, which is tied to consumer spending and strips out food and energy costs, climbed at a 2.3 percent annual pace, up from the prior estimate of 2.2 percent.
Fed officials last week announced a plan under which the central bank will replace $400 billion of short-term debt in its portfolio with longer-term Treasuries maturing in six to 30 years, aiming to reduce borrowing costs and spur growth.
“There are significant downside risks to the economic outlook, including strains in global financial markets,” the Fed’s policy-setting committee said in a statement on Sept. 21. They also cited “weakness in overall labor market conditions,” and said “household spending has been increasing at only a modest pace.”
The economy will expand 1.8 percent in the third quarter, according to a Bloomberg survey of economists conducted Sept. 2 to Sept. 7. That’s down from a 2.1 percent estimate in the August survey. Economists also cut growth projections to 2.2 percent for the final three months of this year, from a previous estimate of 2.5 percent.
Concern about the recovery prompted President Barack Obama to propose $447 billion in infrastructure spending, subsidies to local governments to stem teacher layoffs and cutting in half the payroll taxes paid by workers and small-business owners.
Americans are becoming more cautious as a lack of hiring and limited income growth give them little reason to spend. Retail sales unexpectedly stagnated in August following a 0.3 percent gain in July, Commerce Department figures showed earlier this month.
Wages and salaries climbed by $78.7 billion from April through June, compared with a previous estimate of $80.2 billion, today’s report showed. Real disposable income, or after-tax earnings adjusted for inflation, rose 0.6 percent in the second quarter, half the 1.2 percent annual rate in the first three months of the year.
Corporate earnings climbed 3.3 percent from the prior quarter, after rising 1 percent in the prior period, today’s report showed. They climbed 8.5 percent from the same time last year.
With household purchases cooling and the housing market still struggling, the economy may be counting more on exports and capital investment to sustain growth. Orders for capital goods like computers and communications gear, excluding military hardware and aircraft, climbed 1.1 percent in August, the most since May, Commerce Department figures showed yesterday.
“At a time of, I would say, global volatility, we still see robust demand for our infrastructure products,” Jeffrey Immelt, chairman and chief executive officer of General Electric Co. (GE), said Sept. 26 during a visit to India. “We still feel quite good about our prospects on a global basis.”
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