US economy posts solid 2.3 percent growth rate in second quarter

The department said GDP rose 0.6 percent, revised from a 0.2 per cent contraction.

America’s economy picked up some momentum this spring and summer, but it didn’t wow.

U.S. economists are hopeful about the rest of 2015, projecting overall GDP growth of three per cent. In the second quarter, exports rose at a 5.3 per cent rate, compared with a 6 per cent drop in the first quarter.

• Spending on goods grew 1.1 percent from the first quarter. But it kept a key rate at a record low near zero, at which it’s remained since 2008.

Policymakers said they still needed to see further gains in the jobs market and feel reasonably confident that low inflation will move back to its 2% target rate. But it did not provide a clear signal for the rate hike timetable. The prior estimate said the U.S. economy contracted in the first quarter. For 2016, Zandi is forecasting growth of 3.1 percent, which would be the best since 2005.

• Nondefense spending decreased 0.5 percent after expanding by 1.2 percent in the previous quarter.

“Weaker consumer spending is consistent with the widespread popular sentiment that the economic recovery was foundering”, notes Nariman Behravesh, chief economist at IHS. “It is growing fast enough to keep job gains at a level so that the unemployment rate will continue declining”.

Part of the US economy’s growth spurt was fueled by consumers. There is, however, a lot of uncertainty regarding this estimate after the government took steps to refine the seasonal adjustment for some components of GDP, which economists said left residual seasonality in the data.

Thursday’s second quarter growth statistic is an initial estimate and is subject to significant change in the months ahead.

The modest performance has raised concerns that the U.S. economy has entered a period of historically slow growth.

And that’s important, because sustained economic growth is a function of private-sector investment.

Real GDP for the second quarter grew at an annual rate of 2.3 percent according to the Bureau of Economic Analysis’s advance estimate. Net exports added 0.13 percentage points to growth in the second quarter, after subtracting almost two percentage points the quarter before. Most of the downward revision was concentrated in the first two years subject to revision-2012 and 2013-while real GDP growth over the four quarters of 2014 was revised up, from 2.4 percent to 2.5 percent. The progress has been slow but is more optimistic than the first quarter which gave a scare. No doubt the West Coast dock strike played a role in this by distorting trade flows in the first quarter.

The price index for gross domestic purchases, measuring prices paid by U.S. residents, rose by 1.4% in the second quarter.

BEA says the increase in real GDP was due to personal consumption expenditures, exports, government spending, and residential fixed investment. Nonresidential fixed investment-reflecting spending on software, research and development, equipment and structures-retreated at a 0.6 per cent rate, compared with a 1.6 per cent growth rate in the first quarter.