Report: GDP up 2.3% in quarter

1Q data revised to show growth

In this photo taken on Thursday, Feb. 12, 2015, a man welds parts in fans for industrial ventilation systems at the Robinson Fans Inc. plant in Harmony, Pa. The Commerce Department releases second-quarter gross domestic product on Thursday, July 30, 2015.
In this photo taken on Thursday, Feb. 12, 2015, a man welds parts in fans for industrial ventilation systems at the Robinson Fans Inc. plant in Harmony, Pa. The Commerce Department releases second-quarter gross domestic product on Thursday, July 30, 2015.

WASHINGTON -- The U.S. economy rebounded this spring with annualized growth of 2.3 percent, and new data indicated that there was no contraction in the first quarter after all, the Commerce Department said Thursday.

The gross domestic product, the economy's total output of goods and services, grew at a 2.3 percent annual rate in the second quarter. The government also said GDP in the January-March period grew 0.6 percent instead of shrinking at a 0.2 percent pace.

The latest results mirror a familiar pattern over the last few years. The economy has consistently underperformed in the first quarter and then revved up in the spring and summer.

The uneven momentum has contributed to overall tepid growth since the recession officially ended in June 2009. It's been the slowest recovery since World War II.

"It's not a sharp rebound, but it is a rebound, so that's good," said Nariman Behravesh, chief economist in Lexington, Mass., for IHS Inc. "The stage is set for better performance in the second half. Consumer spending will be the mainstay."

Revised GDP figures for the past three years released by the government Thursday reveal that the economy's already-modest growth since 2011 was even weaker than thought.

Economists, however, are hopeful about the rest of 2015. They expect overall GDP growth to continue strengthening in the second half of this year to around 3 percent, as consumer spending benefits from sizable employment gains. The upbeat outlook explains why the Federal Reserve appears on track to start raising interest rates this year.

On Wednesday, the Fed noted that the job market, housing and consumer spending have all improved. But it kept a key rate at a record low near zero, at which it's remained since 2008. The Fed said it still needs to see some more gains in the job market and feel reasonably confident that low inflation will move back to its 2 percent target rate.

Many economists peg September for the first rate increase, while others say the Fed might wait until the end of the year.

"The second-quarter U.S. GDP data support the Fed's more upbeat tone on economic conditions and suggests that the economy could cope with higher interest rates." said Steve Murphy, U.S. economist with Capital Economics.

The Fed, which has been worried that inflation has hovered consistently below its 2 percent target, got some better news on that front. The new GDP report showed that overall prices, which had been declining for two quarters because of the plunge in oil prices, rose at a 2.2 percent rate in the second quarter. Excluding food and energy, prices accelerated 1.8 percent from 1 percent gains in the previous two quarters.

"The economy is not booming along, but that doesn't mean it is soft either," said Joel Naroff, chief economist at Naroff Economic Advisors. "It is growing fast enough to keep job gains at a level so that the unemployment rate will continue declining."

The second-quarter growth figure was the best showing since a gain of 4.3 percent in the third quarter of last year. The GDP report was the government's first of three estimates.

In the government's newly revised figures for 2012-14, the economy expanded at just a 2 percent annual rate, down from a previous estimate of 2.3 percent. Nearly all the weaker-than-expected growth occurred in 2013, when the government now says the economy expanded just 1.5 percent, less than its previous 2.2 percent estimate.

The changes result from the Commerce Department's annual revisions to its growth data, which are based on updated data from the Census Bureau, IRS and other agencies.

More people sought U.S. unemployment benefits last week, though the increase was from a very low level, and the figures still point to a healthy job market.

Applications for unemployment aid rose 12,000 to a seasonally adjusted 267,000, the Labor Department said Thursday. The four-week average, a less volatile figure that is a better measure of underlying trends, dropped 3,750 to 274,750.

Applications are a proxy for layoffs, and two weeks ago, they fell to the lowest level in almost 42 years. That suggests that Americans are enjoying a nearly unprecedented level of job security.

The number of people receiving benefits rose 46,000 to 2.26 million. That figure has fallen 11.2 percent in the past year as employers have stepped up hiring, though some of that decline reflects those who have exhausted all the benefits available to them.

Information for this article was contributed by Martin Crutsinger and Christopher S. Rugaber of The Associated Press; by Jim Puzzanghera of the Los Angeles Times; and by Shobhana Chandra and Kristy Scheuble of Bloomberg News.

Business on 07/31/2015

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