U.S. Economy Grew at Better-Than-Expected 1.7% Rate in Second Quarter

By MARTIN CRUTSINGER

WASHINGTON (AP) - The U.S. economy grew at a tepid 1.7 percent annual rate in the April-June quarter, suggesting growth will stay weak in the second half of the year.

Slightly stronger consumer spending and greater exports were the main reasons the Commerce Department reported Wednesday that growth was better than its initial estimate of 1.5 percent. Still, growth has slowed from the 2 percent annual rate in the January-March quarter and the 4.1 percent rate in the fourth quarter of 2011.

Economists expect only modest improvement in the second half of the year. Most believe the economy will keep growing, but at a subpar rate of around 2 percent.

"The economy was sluggish in the second quarter and the slight upward revision ... does nothing to change that picture," said John Ryding, an economist at RDQ Economics, in a note to clients.

The report was the government's second look at gross domestic product for the second quarter. GDP measures the country's total output of goods and services, from the purchase of restaurant meals to construction of highways and bridges. A third and final estimate of second-quarter growth will be released next month.

Growth at or below 2 percent is not enough to lower the unemployment rate, which was 8.3 percent in July. Most expect the unemployment rate to stay above 8 percent for the rest of this year.

A weak economy and high unemployment could hurt President Barack Obama re-election chances and bolster Mitt Romney's campaign. Republicans are in Tampa, Fla. this week to formally nominate Romney and have pointed to the dismal growth in making the case to elect their candidate.

Economist Robert Brusca said the various changes in the second estimate should be positive for growth going forward. He noted more consumer demand in the spring than previously thought, which drives 70 percent of economic growth. And he pointed to less restocking of shelves, which suggests businesses could replenish their stockpiles in the current quarter. Faster inventory growth increases factory production, which boosts growth.

But Paul Dales, senior U.S. economist at Capital Economics, said the small revision to second-quarter growth "offers little comfort."

"We are already two months through the third quarter and more up-to-date figures show that the economy is still struggling," Dales said.

Slow growth could prompt the Federal Reserve to take greater steps to boost the economy when policymakers meet again on Sept. 12-13. In late July, Fed policymakers spoke with increased urgency about the need to provide more help for a weak U.S. economy.

Chairman Ben Bernanke could offer some clues Friday to what the Fed might announce when he speaks at a Fed conference in Jackson Hole, Wyo.

Some suspect the Fed will wait to see how the economy performed in August, especially after July's data was better than expected.

Employers created 163,000 jobs in July, the most since February. Consumers stepped up retail spending, factories produced more goods and the housing recovery continued with increases in both new and previously occupied homes.

The upward revision to second-quarter growth was largely because consumers spent at a slightly faster pace than first estimated. Consumer spending grew a 1.7 percent rate, better than the 1.5 percent initial estimated. Exports, which add to growth, were also stronger, growing at a 6 percent rate.

Government spending, which has been a drag on growth for the past two years, contracted again in the second quarter. But the decline at an annual rate of 0.9 percent was less than the initial estimated drop of 1.4 percent. That reflected a much smaller dip in defense spending than first estimated.

All of the changes boosted economic output by $6.5 billion more than previously estimated, leaving total GDP at $13.56 trillion, after adjusting for inflation, in the second quarter.

Increase your money and finance knowledge from home

Goal Setting

Want to succeed? Then you need goals!

View Course »

Understanding Credit Scores

Credit scores matter -- learn how to improve your score.

View Course »

Add a Comment

*0 / 3000 Character Maximum

127 Comments

Filter by:
kev

At the end of King Reagan's first term unemployment was only 1 percent lower then now... Reagan had a much stronger factory base then we do now..Reagan had a better Congress to work with then Obama has now..

August 30 2012 at 7:33 AM Report abuse rate up rate down Reply
Wolmers1965

Well ... the Republicans in Congress and their billionaire multi-national corporate 'partners-in-crime" ought to be popping $5,000 bottles of champagne and celebrate the sluggish economic growth … it is what they have worked so hard to achieve since the 2009-10 fiscal year. They see it as their only ticket to recapture the White House and take complete control of both Houses of Congress and pack the federal courts with ultra-right wing state’s rights conservative activist judges.
Celebrate all! The US Congress you elected in 2010 has done its evil work for partisan political gain. Last year they conspired successfully to cause America to lose it’s A+ credit rating, which they tried to blame on President Obama. As a matter of fact, I have no doubt that some Congressional Republicans and their wealthy cohorts are lamenting that the 1.7% growth is too high. They were planning and scheming for 0% or negative economic growth and no job gains or net job losses.
I hope all of the Obama haters are rich, economically secure and totally self-sufficient, because when you get what you want … do not look to the bad awful dreaded government to assist, if you are not at lease upper-middle class and economically secure and your finances under control.
Those $25-$35 per hour blue collar jobs with great benefits … gone! Collective bargaining rights … gone! The right to organize into worker’s union … gone, it all right to work! College grants and aids … gone! Free public education dismantled and unfunded. Minimum wage laws, unemployment insurance, EEO and Davis-Bacon wage protections … things of the past! Obamacare, Medicare and Medicaid … all history!
This nation shall look like the time before 1930. About 15% of the population shall do well ... the rest, well, may God help you!

August 30 2012 at 4:18 AM Report abuse rate up rate down Reply
1 reply to Wolmers1965's comment
democracks0

Obamites think the Obamas live in poverty and aren't rich. Obamites think that Obama is 99%er. LOL.

I bet you copied your post out of the Nancy Pelosi handbook for Obamite fear mongerers.

August 30 2012 at 8:36 AM Report abuse rate up rate down Reply
PsychedelicSpell

August 2008 3.3 was something to whine about and boy did they most agreed.
http://hotair.com/archives/2008/08/28/economy-grew-33-in-q2/
Now all the sudden 1.7 is time to break out the wine and celebrate. Progressive progress at the speed of spin.

August 30 2012 at 3:39 AM Report abuse rate up rate down Reply
ga7smi

sure it did

August 30 2012 at 1:10 AM Report abuse rate up rate down Reply
Ray

This is a long road to follow. Staying the course is not popular in a society that desires instant gratification.
There is no ''light switch'' that can be thrown and suddenly the economy is back in full steam.

Curiously, it appears, that after listening closely to the republicans approach, that they believe that- there is a ''hidden''? switch/0r breaker to throw and we all will be back to prosperity. Its simply going to take time.
Bashing the standing President is not the solution any of us run too. If some better ideas were presented, lol i'm sure they would look very similar to the ones already in the works. I'm excited-lol- by the ''switch throwers'' enthusiasm with letting big buissness run wide open and no regulations, at the horrible costs to the environment & selling us that this will increase hiring and spendin. The past is our greatest ally. The republicans expand there hold on big money by protecting more- big money further choking out any competion. These very same buisness DO NOT hire more people or raise there wages. They simply add to there bottom line and increase there trustees balance sheets. The costs tohave a republican machine in the white house is dangerous. They will trigger another war- to look strong and build up the military. Thats there history.

August 30 2012 at 12:26 AM Report abuse -1 rate up rate down Reply
1 reply to Ray's comment
icemanbill23

War is not a Republican "history". Every American war or military action over the past 100 yrs.was started or significantly escalated under a Democratic administration except Iraq which had bi-partisan congressional support. The Democrats, "were for it before they were against it" and now own that war too after outspending the Republican Congress on that conflict.
We can indeed throw the "light switch" to boost our economy much like Reagan did after Carter crashed it.
The reverse logic that our present administration used to spark economic growth is absurd. Obama actually believed that Roosevelt's social programs got us out of the Depression. Green energy jobs?..grow the public sector?...what a joke. I said so 3 years ago and unfortunately, I've been proven correct.

August 30 2012 at 2:04 AM Report abuse +2 rate up rate down Reply
1 reply to icemanbill23's comment
chris1011

Both Reagan and Obama used the same technique to bump start the economy. In Reagan's case he simply spent his on a military buildup. The net effect is the same, it causes industry to hire, the new hires spend money, which causes other businesses to build stuff that these people then buy.

In today's economy that doesn't work as well any more because unlike Reagan's time, the new hires in the industries that got Obama federal cash spent their money on Chinese made goods, so the money went overseas, where it got squirreled away. Less money in circulation means the Fed had to print more via quantitative easing, which is a side effect that we did not see in Reagan's time (another reason why this printing of money is not inflationary since the ectra is vacuumed up by the Chinese government and squirreled away).

August 30 2012 at 3:37 AM Report abuse -1 rate up rate down
ybob555

So the economy increased by such a small number ( 0 .2% ) & that is recorded as " it grew at a better than expected rate"?
When economists talk about a 5 or 10 million dollar error in government calculations, they often say "that's a rounding error", so why get so excited about this miniscule percent. It's still well below the number that will truly indicate the economy is turning around, so why the BS article.
People really know the economy is still in the tank, & nothing is being done about it by the government.
Then you have to go to the second last paragraph to find out that "government SPENDING only declined 0.9% instead of the 1.4% as initially estimated, which is 0.5% less, ( compare that will the 0.2% bold headlines ) but they try to hide that toward the bottom of the piece. Gee if it's bad news, it gets buried, so as to not make the administration look bad.
Any favoritism here?

August 30 2012 at 12:16 AM Report abuse +1 rate up rate down Reply
democracks0

When is it going to be my turn to copy and paste a post from Moveon.org. All the Obamites have had their turn.

August 29 2012 at 10:10 PM Report abuse rate up rate down Reply
democracks0

The new thing posted from from Obamites. "Where are the facths"?

Yeah I spelled facts f-a-c-t-h-s. That's how the Obamites pronounce it.

LMAOO

August 29 2012 at 10:07 PM Report abuse -1 rate up rate down Reply
democracks0

Darn it I wanted to be the only one copying and pasting posts from Moveon.org. Now everyones doing it.

August 29 2012 at 10:03 PM Report abuse -2 rate up rate down Reply
1 reply to democracks0's comment
mchairmanmao

Hey Evan, this CON-vention is boring!!! Why no Bush speech tonight on the anniversary of Katrina? Always loved trying to decipher his speeches and you know there was always going to be at least one Bushism out of it, LOL. Seriously can you tell me why he is not there or speaking?

August 29 2012 at 11:19 PM Report abuse -1 rate up rate down Reply
Bill

1.7% is not very good but the AP uses the word better... It is lousy, we wish it was better but is not!!!!! Its losy!!!!

August 29 2012 at 9:21 PM Report abuse rate up rate down Reply