US economy rebounds with 4% growth
WASHINGTON — Fuelled by healthier consumer spending and business investment, the world’s largest economy grew strongly in the second quarter after a slump in the previous three months, raising hopes for sustained growth throughout the rest of the year.
WASHINGTON — Fuelled by healthier consumer spending and business investment, the world’s largest economy grew strongly in the second quarter after a slump in the previous three months, raising hopes for sustained growth throughout the rest of the year.
Gross domestic product rose at a 4 per cent annualised rate — the most since the third quarter of last year — Commerce Department figures showed yesterday. Economists had expected it to expand by 3 per cent.
First-quarter GDP was also revised to show the United States economy contracted only by 2.1 per cent, not 2.9 per cent as previously estimated.
The Bureau of Economic Analysis said the growth reflected a rise in private inventory investment and exports, an acceleration in personal consumption expenditure and upturn in state and local government spending.
Consumer spending, which accounts for more than two-thirds of US economic activity, rose 2.5 per cent in the second quarter, compared with a rise of 1.2 per cent in the first, as Americans bought lasting manufactured goods and spent a bit more on services.
Despite the pick-up in consumer spending, Americans saved more in the second quarter. The saving rate grew to 5.3 per cent from 4.9 per cent in the first quarter as incomes rose, which bodes well for future spending.
Exports of goods and services increased 9.5 per cent in the second quarter, in contrast to a dip of 9.2 per cent in the first. Corporate spending rose at a 5.9 per cent rate after being little changed in the first quarter.
“The economy is looking good,” said PNC Financial Services Group chief economist Stuart Hoffman. “The momentum for the second half is solid.”
US stocks opened higher yesterday, with a separate report showing private employers added 218,000 jobs to their payrolls this month, a decline from June’s hefty gain of 281,000, doing little to change perceptions that the economy is strengthening.
The Dow Jones industrial average rose 0.33 per cent, the S&P 500 gained 0.39 per cent and the Nasdaq Composite added 0.63 per cent.
The GDP data, released only hours before Federal Reserve officials concluded a two-day policy meeting, may fuel debate on whether the central bank may need to raise interest rates a little sooner than anticipated.
Annual revisions, also released yesterday, showed the US economy grew at the strongest pace in a decade in the second half of last year. The economy grew at an annual rate of 4.5 per cent in 2013’s third quarter, up from a previous estimate of 4.1 per cent.
Growth was 3.5 per cent in the fourth quarter, up from 2.6 per cent. The average 4 per cent annual pace was the best six-month showing since 2003.
The revised figures show growth was accelerating before harsh weather in the first quarter led to a contraction. However, growth was weaker in 2012 than the government had estimated, the revisions showed.
In 2013 as a whole, the economy expanded 2.2 per cent, up from the previous estimate of 1.9 per cent. It grew only 2.3 per cent in 2012, down from 2.8 per cent. Agencies