US GDP grows 1.7% in Q2
Its GDP grows 1.7% as business spending rebounds
US economic growth unexpectedly accelerated in the second quarter, laying a firmer foundation for the rest of the year that could bring the Federal Reserve a step closer to cutting back its monetary stimulus.
Gross domestic product grew at a 1.7% annual rate, the Commerce Department said, stepping up from the first quarter’s downwardly revised 1.1% expansion pace.
Economists polled by Reuters had forecast the economy growing at a 1% pace after a previously reported 1.8% advance in the first three months of the year.
A rebound in business spending, export growth and a sharp moderation in the pace of decline in government outlays boosted economic growth in the April-June period, offsetting a slowdown in consumer spending and a steady rate of inventory accumulation.
Still, the report marked a third straight quarter of GDP growth below 2%, a pace that normally would be too soft to bring down unemployment. But growth was poised to gain even more momentum in the second half of the year as the fiscal burden brought on by belttightening in Washington eases.
Federal Reserve officials, wrestling with a decision on the future of their US$85bil per month bond-buying program, will probably nod to the downward revision to firstquarter growth, but draw comfort from the pickup in output last quarter, when they wind-up a twoday meeting later on Wednesday.
Fed chairman Ben Bernanke said last month that the central bank was likely to start curtailing the bond purchases later this year and would probably bring them to a complete halt by the middle of 2014, if the economy progressed as expected. Adding to the better tenor of the report, comprehensive revisions to the data cast the economy in a better light than previously. The government has implemented some changes in how it calculates GDP.
For example, research and development spending will now be treated as investment, and defined benefit pension plans will be measured on an accrual basis, rather than as cash. Economic growth was relatively stronger between 2009 and 2012 than previously reported. In fact, the economy grew 2.8% last year, 0.6 percentage points faster than the government had previously estimated. — Reuters