GDP Surges Despite Slower Consumer Spending
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Gross Domestic Product 2QAdv 1Q !Surprise: Yes !
Overall GDP: 5.2% 4.8%r !Trend:Faster !
PCE Price Index: 2.3% 3.5%r ! Growth !
!Consens.:3.9% !
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By Jonathan Nicholson
WASHINGTON (Dow Jones)--U.S. economic growth unexpectedly bounded ahead in the second quarter, rising at a 5.2% clip from the first quarter's downwardly revised 4.8% pace, the Commerce Department said Friday.
The spurt in growth came from increased investment by businesses and robust, though slowing, spending by consumers. Even as growth sped up in the quarter, measures of inflation increased at a slower pace.
The news is likely to unsettle investors, who had been expecting a much smaller reading on growth. In a Dow Jones-CNBC survey of 11 economists, the median forecast called for GDP to grow at a 3.9% annual rate.
The figures may also cause consternation at the Federal Reserve, as they cast doubt on the idea the economy slowed substantially at the beginning of the summer.
When Fed policymakers left interest rates unchanged at their last meeting, they cited "tentative" signs of slowing growth. The Fed next meets Aug. 22. Most analysts believed the odds were against a further tightening of policy at that meeting, though the new data may change that perception.
Still, consumer spending rose at a slower rate in the second quarter than in the first. Spending rose at a 3.0% rate, down from the 7.6% pace seen in the first quarter. Real final sales increased at a 4.2% rate, compared with the prior quarter's 6.7% pace.
Business investment continued to increase rapidly in the quarter, rising at a 19.1% pace and boosted by a 21.0% increase in equipment and software. Commerce said business investment added 2.41-percentage points to GDP in the second quarter.
Also adding to growth in the quarter was a rebound in spending by the federal government, which rose at a 17.5% pace after falling by 14.2% in the first quarter.
Inventories also surged ahead in the quarter, rising at a $53.7 billion rate and addding almost a percentage point to GDP.
International trade was the only substantial drag on growth. Increased imports subtracted more than two percentage points from growth in the quarter.
Even while GDP accelerated, the inflation measures in the report may sooth investors' concerns. The price index for consumer spending increased at a 2.3% rate, slower than the 3.5% pace in the first quarter. The index for gross domestic purchases grew at a 2.2% rate, down from 3.8%.
The revisions to previous quarter's numbers were due to annual revisions made by government statisticians. In addition the slower first quarter reading, the fourth quarter of 1999 saw growth at an 8.3% rate, the fastest pace since 1984. |
