Economy bounces back: GDP grows 2.3% in second quarter

August 03 02:45 2015

The U.S. economy bounced back in the second quarter on stronger consumer spending, exports and home construction, and its performance in the first quarter wasn’t as feeble as initially believed. Gross domestic product — the value of goods and services produced in the U.S. — expanded at a seasonally adjusted annual rate of 2.3% in the April-June period, the Commerce Department said Wednesday. Economists surveyed by Bloomberg expected 2.5% growth.

The government also revised up its estimate for the first quarter, turning a 0.2% contraction into 0.6% growth, mostly because of stronger business investment and federal government spending. But it revised down estimates for 2011 to 2014, revealing that growth in that period was somewhat weaker. The economy expanded by 2% in that period, below previous estimates of 2.3% The economy’s still-weak first-quarter showing has been largely blamed on temporary factors such as rough weather and a West Coast ports slowdown. Many expect the economy to grow by a solid 3% at an annual rate in the second half of the year.

The economy’s solid but not spectacular performance in the second quarter could help the Federal Reserve decide whether to raise interest rates for the first time in nearly a decade at its September meeting. The report paints “a reassuringly bright picture of the health of the U.S. economy so far this year,” says Markit’s chief economist Chris WIlliamson, and raises “the odds of the Fed hiking interest rates in September. Strong job and income growth and low gasoline prices prompted Americans to open their wallets in the second quarter as consumer spending increased 2.9%, up from 1.8% in the first quarter.

And exports jumped 5.3% after falling 6% previously. The strong dollar has hurt U.S. shipments but its effects have eased recently. Outlays for housing construction also jumped 6.6%. But business investment overall fell 0.6%, as energy companies continued to scale back drilling amid low oil prices. And slower business stockpiling subtracted slightly from growth after adding to it in the first three months of the year. And federal government spending fell modestly.