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September 26, 2015

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Home » Business » Economy

US expands in spring, likely slows in summer

Source: AP | September 26, 2015, Saturday | Print Edition

THE US economy grew at an even faster clip in the spring than previously estimated. But that growth likely slowed in the summer, held back by global headwinds and turbulent financial markets.

The overall economy expanded at an annual rate of 3.9 percent in the April-June quarter, up from a previous estimate of 3.7 percent, the Commerce Department said yesterday. The new-found strength came from additional gains in consumer spending, business investment and residential construction.

The second-quarter expansion in the gross domestic product, the economy’s total output of goods and services, was a marked improvement from an anemic 0.6 percent increase in the first quarter when the economy was battered by a harsh winter.

Economists estimate that growth in the third quarter has slowed to around 2.5 percent.

The revision in second-quarter growth was led by a boost in consumer spending, which grew 3.6 percent, up from the previous estimate of a 3.1 percent advance. The stronger result reflected increases in spending on such consumer services as health care and transport.

Business investment spending was revised higher, reflecting more spending on structures and equipment. Residential building grew 9.3 percent, better than the 7.6 percent growth estimated last month.

Yesterday’s report was the government’s third and final estimate for second-quarter growth. The initial look tabbed GDP growth in the spring at 2.3 percent, which was revised up to 3.7 percent last month.

Economists believe the subsequent slowdown in the summer will reflect a reduction by businesses in restocking their inventories.

Once unwanted inventories are worked down, the expectation is that growth will accelerate again in the final quarter of the year. Economists at Macroeconomic Advisors are forecasting GDP growth of 2.7 percent in the October-December period.

For the whole year, economists expect a modest gain of around 2.2 percent, in line with the modest growth seen during the six years of the current recovery. In 2014, the economy grew 2.4 percent after a 1.5 percent growth in 2013.

Activity has been held back this year by a rise in the value of the US dollar, which weakens sales of US exports while making foreign goods more competitive in the US.

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