U.S. Economy Gains Steam, Expands at Brisk Pace in 2Q

Economy GDP
J Pat Carter/AP

By Lucia Mutikani

WASHINGTON -- The U.S. economy grew at its fastest pace in 2½ years in the second quarter with all sectors contributing to the jump in output in a bullish signal for the remainder of the year.

The Commerce Department on Friday raised its estimate of gross domestic product to show the economy expanded at a 4.6 percent annual rate. That was in line with Wall Street's expectations.

The best performance since the fourth quarter of 2011 reflected a faster pace of business spending and sturdier export growth than previously estimated.

But consumer spending, which accounts for more than two-thirds of U.S. economic activity, was unrevised as stronger health care outlays were offset by weaknesses in recreation and durable goods spending.

With domestic demand increasing at its fastest pace since 2010, the economic recovery appeared more durable after growth slumped in the first quarter because of an unusually cold winter.

So far, economic data such as manufacturing, trade and housing suggest that much of the second-quarter momentum spilled over into the third quarter. Growth estimates for the July-September quarter range as high as a 3.6 percent pace.

%VIRTUAL-WSSCourseInline-876%Second-quarter GDP was previously estimated to have advanced at a 4.2 percent rate. The economy contracted at a 2.1 percent pace in the first quarter.

The dollar extended gains against a basket of currencies on the report. U.S. stock index futures were little changed.

The strong growth pace and domestic demand growth help to explain the robust job gains during the quarter, as well as the sharp decline in the unemployment rate.

When measured from the income side, the economy grew at a robust 5.2 percent pace, revised up from the previously reported 4.7 percent rate.

Business spending on equipment was raised to an 11.2 percent pace from a 10.7 percent rate. Businesses also invested more in nonresidential structures, such as gas drilling, as well as in research and development.

Businesses accumulated $84.8 billion worth of inventory in the second quarter, a bit more than the previously reported $83.9 billion. That saw restocking contributing 1.42 percentage points to GDP growth rather than 1.39 percentage points.

Still, there is little sign of an inventory overhang, a positive signal for third-quarter GDP growth.

Growth in consumer spending was unrevised at a 2.5 percent rate in the second quarter.

Though trade was a drag for a second consecutive quarter, export growth was raised to an 11.1 percent pace, the fastest since the fourth quarter of 2010, from a 10.1 percent rate.

Housing market-related spending was revised up as was government spending.

Corporate profits rebounded a bit more strongly than previously reported from a decline in the first quarter that had been spurred by the expiration of a depreciation bonus.

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