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A Ford worker moved a stack of Lincoln MKS body sides in Chicago Heights, Ill. The U.S. economy grew at a 2.5 percent annual rate in the April-June quarter, instead of the Labor Department’s earlier estimate of 1.7 percent. CHARLES REX ARBOGAST • Associated Press file

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2nd-quarter GDP growth boosted

  • Article by: Jeffry Bartash
  • MarketWatch
  • August 29, 2013 - 9:06 PM

– The U.S. economy grew much faster in the second quarter than previously believed, mainly because of an improved trade picture and higher demand for American-made goods and services.

Yet the spending pattern of American consumers — the linchpin of the U.S. growth — saw no improvement under the government’s latest revision. That suggests the economy entered the third quarter with little added momentum.

Gross domestic product rose at a 2.5 percent annual rate in the April-to-June period instead of an initial reading of 1.7 percent, the Commerce Department said Thursday. That’s much faster than 1.1 percent in the first quarter and a scant 0.1 percent growth rate in the final three months of 2012. It also topped economists’ revised expectations.

Still, few analysts expect U.S. growth to accelerate much in the second half of the year in light of reduced government spending, slow wage growth, a still-high unemployment rate and a sluggish global economy. The U.S. is forecast to grow 2.4 percent in the third quarter and 2.8 percent in the fourth quarter, according to the latest poll of economists.

“The positive news is that the economy is still advancing, although the fact that growth has not surpassed 3 percent since the first quarter of 2012 remains troubling,” said Jim Baird, chief investment officer at Plante Moran Financial Advisors.

GDP is the broadest measure of an economy’s health, reflecting the value of all the goods and services a nation produces. Economists surveyed by MarketWatch had expected GDP to be revised up to 2.3 percent, largely because of a smaller U.S. trade deficit.

And that’s pretty much what happened. U.S. exports were revised up to an 8.6 percent gain from 5.4 percent, while the increase in imports was lowered to 7 percent from 9.5 percent.

Companies also restocked warehouse shelves a touch faster than previously believed; inventories rose by $62.6 billion instead of $56.7 billion.

In another positive sign, underlying demand for U.S.-produced goods and services rose at 1.9 percent pace in the second quarter instead of 1.3 percent, though that increase also reflected higher exports.

What’s more, businesses sharply boosted investment in buildings and plants. The increase in spending was revised up to a hefty 16.1 percent from 6.8 percent.

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