Economy in U.S. expanded in second quarter at 1.7% rate

The U.S. economy expanded more than previously estimated in the second quarter, reflecting an improvement in the trade deficit and a pickup in household spending on utilities.

Gross domestic product climbed at a 1.7 percent annual rate from April through June, up from an initial estimate of 1.5 percent, revised Commerce Department figures showed today in Washington. The figure followed a 2 percent first-quarter pace and matched the median estimate in a Bloomberg survey. The revised data also showed companies invested in new equipment at the weakest pace in almost three years.

A second straight quarter of slowing growth shows the world’s largest economy is having difficulty making headway as consumers stay frugal and looming tax changes prompt companies to limit investment and hiring. Chairman Ben S. Bernanke this week may reaffirm the view of many Federal Reserve policy makers that more stimulus will be needed unless the expansion shows signs of strengthening.

“We are very much struck in a slow-growth mode,” said Mark Vitner, a senior economist at Wells Fargo Securities LLC in Charlotte, North Carolina, who correctly forecast the revision. “We still don’t see the economy breaking free of this 1.5 percent to 2 percent growth rate. A 1.7 percent pace is the personification of the Fed’s frustration.”

Stock-index futures held gains after the report, with the contract on the Standard & Poor’s 500 Index expiring in September climbing 0.2 percent to 1,410 at 8:55 a.m. in New York.

Growth forecasts from the 80 economists surveyed ranged from 1.2 percent to 2.2 percent. The economy expanded 4.1 percent in the fourth quarter.

Consumer Spending

Consumer spending, about 70 percent of the economy, climbed at a 1.7 percent annual rate, the weakest in a year and revised from a 1.5 percent initial estimate. Purchases added 1.2 percentage points to growth.

The revision reflected the biggest gain in spending on services since the fourth quarter of 2006. The largest contributor came from more spending on electricity and gas as temperatures across the country approached record highs.

At the same time, consumers’ purchasing power eased, with disposable income adjusted for inflation rising 3.1 percent from April through June after a 3.7 percent gain in the first quarter. The saving rate in that period climbed to 4 percent from 3.6 percent in January through March.

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