WASHINGTON - The U.S. economy grew much faster in the second quarter than previously believed, mainly because of an improved trade picture and higher demand for American-made goods and services.
WASHINGTON — The U.S. economy grew much faster in the second quarter than previously believed, mainly because of an improved trade picture and higher demand for American-made goods and services.
Yet the spending pattern of American consumers — the linchpin of the U.S. growth — saw no improvement under the government’s latest revision. That suggests the economy entered the third quarter with little added momentum.
Gross domestic product rose at a 2.5 percent annual rate in the April-to-June period instead of an initial reading of 1.7 percent, the Commerce Department said Thursday. That’s much faster than 1.1 percent in the first quarter and a scant 0.1 percent growth rate in the final three months of 2012. It also topped economists’ revised expectations.
In recent trading, U.S. stocks rose in the wake of the upward revision to GDP and another report showing a decline in weekly jobless claims.
Still, few analysts expect U.S. growth to accelerate much in the second half of the year in light of reduced government spending, slow wage growth, a still-high unemployment rate and a sluggish global economy. The U.S. is forecast to grow 2.4 percent in the third quarter and 2.8 percent in the fourth quarter, according to the latest poll of economists.
“The positive news is that the economy is still advancing, although the fact that growth has not surpassed 3 percent since the first quarter of 2012 remains troubling,” said Jim Baird, chief investment officer at Plante Moran Financial Advisors.
The higher GDP figure might even reinforce the Federal Reserve’s timetable on when to begin to scale back its economic stimulus program. Many economists think the Fed will begin a long retreat from its massive bond-buying strategy starting in September.
GDP is the broadest measure of an economy’s health, reflecting the value of all the goods and services a nation produces. Economists surveyed by MarketWatch had expected GDP to be revised up to 2.3 percent, largely because of a smaller U.S. trade deficit.
And that’s pretty much what happened. U.S. exports were revised up to an 8.6 percent gain from 5.4 percent, while the increase in imports was lowered to 7 percent from 9.5 percent.
The smaller trade gap accounted for almost the entire increase in GDP. Growth is higher when a nation sells more of its own goods and services to other countries and buys less stuff from its trading partners.
Companies also restocked warehouse shelves a touch faster than previously believed; inventories rose by $62.6 billion instead of $56.7 billion.
In another positive sign, underlying demand for U.S.-produced goods and services rose at 1.9 percent pace in the second quarter instead of 1.3 percent, though that increase also reflected higher exports.
What’s more, businesses sharply boosted investment in buildings and plants. The increase in spending was revised up to a hefty 16.1 percent from 6.8 percent. Investment in equipment and intellectual property, on the other hand, was a bit softer.
Most other aspects of the GDP report were little changed.
The increase in consumer spending, for example, remained the same at 1.8 percent. That’s down from 2.3 percent in the first quarter and falls largely in line with spending patterns over year.
Americans are spending at a pace commensurate with the slow growth in their inflation-adjusted wages. Although after-tax or disposable income climbed 3.2 percent in the second quarter, it’s only risen 0.7 percent in the past year.
Government spending, meanwhile, fell a somewhat sharper 0.9 percent instead of 0.4 percent. The downward revision was the result of a drop in state and local spending, rather than the increase that was initially reported.
Less government spending only subtracted 0.1 percentage point from U.S. growth, however.
Corporate profits, adjusted for special factors, climbed by 3.9 percent or $78.3 billion, the government estimated. That could be a good sign if companies use the profits to boost investment or return more cash to shareholders.
The GDP report will be refined through a third and final update in another month.
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