Newspaper article International New York Times

U.S. Growth Stronger in 2nd Quarter Than Thought ; Rate, Revised Up to 3.7%, Suggests That Economy Is Going Slow but Steady

Newspaper article International New York Times

U.S. Growth Stronger in 2nd Quarter Than Thought ; Rate, Revised Up to 3.7%, Suggests That Economy Is Going Slow but Steady

Article excerpt

The revision, more than a full percentage point higher, provides further assurance that the American economy remains on an even keel.

The United States economy grew much more quickly last quarter than initially thought as businesses and consumers increased spending, the government said Thursday.

At 3.7 percent, the revised estimate for the annualized rate of economic expansion in the spring is more than a full percentage point higher than the initial reading of 2.3 percent reported by the Commerce Department in late July.

It provides further assurance that the American economy remains on an even keel, despite questions about whether the United States can skirt mounting economic turmoil in China and other emerging markets as well as a volatile stock market at home.

Much of the revision Thursday was powered by increased corporate spending. Business investment increased at a 3.2 percent annual rate in the second quarter, according to Commerce Department statisticians, compared with the initial estimate of a 0.6 percent decline.

Other tailwinds included a better trade picture, as net exports improved, and increased government spending, especially at the state and local level.

But companies also added to their stockpiles of goods, which could weigh on growth in the months ahead. Real private inventories increased by $121.1 billion in the second quarter, adding a little more than 0.2 percentage point to overall economic activity.

The upward adjustment was better than expected by economists on Wall Street, who predicted that the revised growth rate would come in at 3.2 percent. This is the second estimate of economic growth for the second quarter; the third and final estimate will be released in late September.

"This was a very solid report and very much confirms our view that the U.S. economy is on a solid growth track," said Nariman Behravesh, chief economist at IHS, a private research and forecasting firm in Lexington, Mass. "The good news is that there was strength in many parts of the economy, both in terms of consumer spending and business sector investment."

Although the revision was certainly good news, investors are already turning their attention to fresher data to determine the economy's course and whether the Federal Reserve will make its long- awaited move to raise interest rates in September or wait until later meetings, in part because markets remain on edge. …

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