This article is from the source 'nytimes' and was first published or seen on . It last changed over 40 days ago and won't be checked again for changes.

You can find the current article at its original source at http://www.nytimes.com/2013/08/01/business/economy/us-economy-grew-by-1-7-in-2nd-quarter-faster-than-expected.html

The article has changed 5 times. There is an RSS feed of changes available.

Version 1 Version 2
U.S. Economy Grew at 1.7% Rate in 2nd Quarter, Faster Than Expected U.S. Economy Grew at 1.7% Rate in 2nd Quarter, Faster Than Expected
(about 1 hour later)
The economy grew at an annual rate of 1.7 percent in the second quarter, an increase from the first part of the year and well ahead of the pace economists expected. The United States economy performed a bit better than expected in the second quarter, shrugging off some of the impact from higher taxes and lower federal spending in the spring, the government reported Wednesday.
The growth rate for the first quarter, however, was revised downward by the Bureau of Economic Analysis, to 1.1 percent from 1.8 percent. The gross domestic product grew at an annual rate of 1.7 percent, hardly indicative of an economic boom, let alone enough to bring down elevated levels of unemployment soon. It is also the third quarter in a row in which growth failed to top 2 percent, the average since the recession ended in 2009.
The resilience in the second quarter came despite higher taxes and as automatic spending cuts imposed this year by Congress took effect. Federal spending decreased 1.5 percent in the April-June quarter. That decline came after an 8.7 percent drop in federal spending in the first quarter, and a 14.8 percent fall in the fourth quarter of 2012. Still, the increase was an acceleration from growth in the first quarter of 2013, which was revised downward to 1.1 percent from an earlier estimate of 1.8 percent by the Bureau of Economic Analysis.
Since the end of the recession in 2009, the economy has grown at annual rate of about 2 percent. Economists surveyed before the announcement estimated that the economy would record growth of just under 1 percent in the second quarter. “It was a reasonable performance,” said Ian Shepherdson, chief economist at Pantheon Macroeconomics. “In the long run, it’s not enough but I’ll take growth wherever I can get it.”
Most experts predict growth will pick up in the second half of 2013, as the drag from the federal spending cuts and higher taxes begins to fade. The economy’s trajectory is being closely watched by the Federal Reserve as it determines whether to ease its huge stimulus efforts. Fed policy makers will conclude a two-day meeting Wednesday and issue their latest statement on the economy early Wednesday afternoon.
The economy — and whether it will pick up speed or remain sluggish — is being closely watched by policy makers at the Federal Reserve, which will issue its latest statement on Wednesday afternoon. On Wall Street, stocks rose modestly as traders readied for the Fed announcement, watching closely for any change in the language of the statement that might indicate the central bank’s course.
The chairman of the central bank, Ben S. Bernanke, has hinted that the Fed will soon begin winding down part of its extensive bond purchasing program aimed at stimulating the economy, but the timing is uncertain. On Wall Street, analysts and traders are speculating the Fed could start tapering as early as September if the economy enjoys healthier growth and the job situation improves, or it could be delayed to December or beyond on evidence of weakness. Many economists had anticipated growth of below 1 percent in the second quarter, as automatic spending cuts imposed by Congress and higher taxes that went into effect this year began to bite.
While the Federal Reserve is not expected to announce a change in policy, the economic data in the second quarter paints a more vigorous picture than anticipated and may increase the odds that the Fed will taper sooner rather than later. Federal spending did decline by 1.5 percent in the second quarter, but the drop was not as severe as the falloff in government spending in earlier quarters. Meanwhile, exports rose 5.4 percent, reversing a decline in the first quarter.
Indeed, there were pockets of strength in Wednesday’s data from the Bureau of Economic Analysis. Residential fixed investment, for example, increased 13.4 percent, a sign the housing sector continues to recover. Personal consumption rose 1.8 percent, as consumers showed a measure of resiliency. Spending on durable goods increased 6.5 percent. Most experts predict growth will pick up in the second half of 2013 as the drag from the federal spending cuts and higher taxes begins to fade.
More clues about the economy’s performance will come Friday, when the Labor Department reports on monthly job creation and the unemployment rate. Economists estimate the economy created 185,000 jobs in July, according to a Bloomberg News survey, a bit below the 195,000 level in June, with the unemployment rate falling to 7.5 percent, from 7.6 percent. “On balance it was a positive report showing a healthier economy than previously believed,” said Michelle Meyer, senior United States economist at Bank of America Merrill Lynch. “But growth has slowed in the past few quarters, reflecting fiscal tightening in Washington.”
The chairman of the Federal Reserve, Ben S. Bernanke, has hinted the Fed will soon begin tapering, or winding down part of its extensive bond purchases aimed at stimulating the economy, but the timing is uncertain.
On Wall Street, analysts and traders are speculating the Fed could start tapering as early as September if the economy enjoys healthier growth and the job situation improves, or it could be delayed to December or beyond on evidence of weakness.
While the Federal Reserve is not expected to announce a change in policy later in the day Wednesday, the economic data in the second quarter paints a more vigorous picture than anticipated and may increase the odds that the Fed will taper sooner rather than later.
Indeed, there were pockets of strength in Wednesday’s data from the Bureau of Economic Analysis. For example, residential fixed investment increased by 13.4 percent, a sign the housing sector continues to recover. Personal consumption rose 1.8 percent, as consumers showed some resiliency, especially given the increase in payroll taxes at the beginning of 2013.
Higher inventories, always a volatile component of economic reports, added 0.41 percentage point to overall growth. But analysts cautioned that inventory estimates were often adjusted as more data comes in, raising the possibility that second quarter growth could be revised downward in the future.
More clues about the economy’s performance will come Friday when the Labor Department reports on monthly job creation and the unemployment rate. Economists estimate the economy created 185,000 jobs in July, according to a Bloomberg survey, a bit below the 195,000 level in June, with the unemployment rate falling to 7.5 percent, from 7.6 percent.
The latest data come as the government performed its first comprehensive revision in how the economy is measured since July 2009.
As a result, the estimated growth in 2012 was actually healthier than originally thought. Last year’s annual rate of growth in economic output was revised upward to 2.8 percent, from 2.2 percent. The government also slightly adjusted the estimate of the severity of the recession from 2007-9, saying that the economy contracted at annual rate of 2.9 percent, instead of 3.2 percent.