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Wednesday, Oct. 1, 2014

U.S. economy grows at scorching 4 percent in 2nd quarter

By By Kevin G. Hall, McClatchy Washington Bureau (MCT)

Published: Wed, July 30 10:55 p.m. MDT

 July 17, 2014 - Construction workers build a commercial complex in Springfield, Ill. The government issues its first of three estimates of how fast the U.S. economy grew in the April-June quarter on Wednesday, July 30, 2014.

July 17, 2014 - Construction workers build a commercial complex in Springfield, Ill. The government issues its first of three estimates of how fast the U.S. economy grew in the April-June quarter on Wednesday, July 30, 2014.

(Seth Perlman, Associated Press)

WASHINGTON — The much-stronger-than-expected 4 percent rate of annual U.S. economic growth from April through June, reported Wednesday by the Commerce Department, put to rest fears that the U.S. economy was slipping into low gear.

Offsetting a dismal start to the year, the economy grew at a sizzling rate in the second quarter, powered by what the Bureau of Economic Analysis said were improvements in personal consumption, exports and businesses replenishing their inventories.

Adding to the sense of relief, earlier revisions to the negative rate of growth from January to March were revised yet again. What had earlier been thought to be a 2.9 percent contraction over the first three months of the year is now said to be a 2.1 percent contraction.

That means things weren’t as bad as they seemed, and the U.S. economy weathered a brutal winter. With a strong snap-back over the second quarter, the first six months of the year add up to a 1.9 percent rate of growth. Over the past 12 months, that rate is 2.4 percent.

“I think the first quarter is the anomaly,” said Gus Faucher, senior economist for PNC Financial Services Group in Pittsburgh. “The fundamentals look pretty solid. You’ve got gains in consumer spending that are being supported by gains in jobs growth.”

Personal consumption expenditures increased at an annual rate of 2.5 percent from April to June, after growing by only 1.2 percent the previous quarter. Consumption powers about three-quarters of U.S. economic activity.

Friday will bring the Labor Department’s monthly employment report, for July, and economists are expecting a sixth straight month of job gains above 200,000, something that hasn’t happened since the late 1990s.

The ADP National Employment Report, a payroll-driven gauge of private-sector hiring, was released Wednesday and showed 218,000 new jobs over the past month. The government report has come in higher than the ADP estimates in recent months.

The improving outlook allowed the Federal Reserve to announce Wednesday that it’s trimming its purchases of government and mortgage bonds by another $10 billion per month to a monthly total of $25 billion. The Fed has bought bonds to stimulate economic activity. It’s expected to end in its bond-buying program in October.

Most mainstream economic forecasters had expected second-quarter growth in the 3 percent range, about the inverse of what had been a 2.9 percent first-quarter contraction before Wednesday’s revision. It would have meant the first half of the year was a wash, with a good quarter offsetting a bad one. Instead, the new numbers left the distinct impression of an economy accelerating.

“In the second quarter, growth in consumer spending and business investment picked up from the previous quarter, and residential investment increased following two straight quarters of decline,” noted Jason Furman, the head of the White House Council of Economic Advisers. “Additionally, state and local government spending grew at the fastest quarterly rate in five years.”

The numbers would have been even stronger had imports not surpassed the pace of exports and subtracted from growth. Exports grew at an annualized rate of 9.5 percent from April to June, offsetting a 9.2 percent decline from January through March.

Analysts said Wednesday’s report boded well for the rest of the year.

“On balance, today’s report shows greater near-term healing and momentum, reducing the downside risks and leaving us comfortable with our forecast for above 3 percent growth through next year,” Michelle Meyer, a senior U.S. economist at Bank of America Merrill Lynch, said in an investment note.

Economists at PNC Financial Services had been more bullish than most forecasters, predicting last Friday that the second-quarter growth rate would surprise at 4 percent.

“We’re feeling pretty good about that,” said Faucher. “We just knew, given the jobs numbers, that what we saw in the first quarter didn’t make sense. The underlying fundamentals of the economy look pretty good.”

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1. pragmatistferlife
salt lake city, utah,
July 30, 2014

Ahemmmm!

2. SCfan
clearfield, UT,
July 30, 2014

And since a lot of middle class America has been working with reduced wages and lower yearly income, we all will be waiting for that pay raise.

3. prelax
Murray, UT,
July 30, 2014

The u-6 unemployment numbers still sit at 12%. 12% of our country is unemployed or underemployed, looking for full time work.

The jobs being created the past two years are part time jobs. They are not going to lift the economy out of recession.

4. DN Subscriber
Cottonwood Heights, UT,
July 30, 2014

Anyone want to bet that this glorious good news from Dear Leader will be "revised downward" next quarter?

Anyone remember all those economic statistics leading up tot he 2012 elections that turned out to be manipulated?

You simply cannot believe anything Obama tells the American people.

5. David
Centerville, UT,
July 30, 2014

Finally, maybe we are coming out of the longest recession. Does the fact that we are finally, hopefully seeing recovery, validate Obama's economic policies? Or does the length of the recession speak to the poor management of the economy under this administration?

What could have been…

If Obama had approved the pipeline from Canada.

If Obama hadn't raised taxes on most Americans.

If Obama hadn't increased fees and taxes via Obamacare.

But we can, perhaps, begin to feel assurance that the economy will grow again, despite Obama.