U.S. GDP Rebounds 4% After Harsh Winter Quarter

Bikram Pandey
30 Jul, 2014
New York City

The first estimate of the U.S. economic growth in the second quarter came in at 4%, reversing the revised contraction of 2.1% in the winter quarter. The increase in inventories, rising cosumer spending and expansion in government spending at all levels contributed to the surge in annual rate.

U.S. gross domestic product, the broadest measure of the economy, advanced at an annual rate of 4% after adjusting for seasonal factors, the Commerce Department said today.

The growth in the quarter was a sharp reversal from the first quarter shrinkage of revised 2.1% from the previous estimate of 2.9%.

The annual rate of 4% or better has been achieved only four times in the last forty quarters dating back to the first quarter of 2004.

The government also revised data dating back to 2011. Second half 2013 growth rate was revised higher to 4% but figures for previous years showed weaker than previous estimates and uneven recovery. The latest economic expansion is one of the weakest since World War II.

The preliminary estimates are generally a suspect because they are based on healthcare spending and trade flows which are always revised in the subsequent two estimates.

In the second quarter, consumer spending rose 2.5% annual rate after harsh winter conditions in the first quarter and businesses restocked inventories and added 1.66 percentage points to the quarterly growth.

Business spending on equipment increase at 7% annual rate in the second quarter reversing the decline in the first. And residential fixed investments soared at 7.5% rate and reversed the decline in the previous two quarters.

International trade remained a drag on the overall economy despite the surge of 9.5% in U.S. exports but imports also soared 11.7% in the period.

Federal government outlay declined for the seventh quarter in a row but governments at state and local levels increased spending and total government spending at all levels increased at 1.6% in the second quarter.