Economy Grows Faster Than Predicted in Second Quarter
The gross domestic product (GDP) grew at a 3.3 percent annual rate between April and June, the Commerce Department said Thursday, exceeding an initial government estimate of 1.9 percent issued last month. Economists had forecast 2.7 percent growth in the second quarter, according to a Bloomberg News survey.
The gain is the largest since the third quarter of 2007 — the economy shrank in the fourth quarter of 2007, and grew at only .9 percent in the first quarter of 2008.
The growth was mainly spurred by record exports, as other countries took advantage of the declining value of the dollar to buy U.S. goods. The U.S. trade deficit in the second quarter was the smallest in eight years, and trade added 3.1 percent to the GDP. Excluding trade, the GDP would have grown at .2 percent.
A $600 government-issued tax rebate also boosted consumer spending. Consumer spending was up 1.7 percent in the second quarter, the biggest growth in nearly a year.
Despite the good news, economists say that the growth is likely not a sign that the economy has permanently rebounded — in fact, they predict that the second quarter is likely to be the high point of 2008.
“Outside of trade, the economy is considerably weaker,” Carl Riccadonna, an economist at Deutsche Bank Securities, told Bloomberg News. “When you look at the spending, it looks terrible for the second half of the year.”
And slowing economies in many U.S. trade partner countries mean that export growth may slow down as well.
The GDP report also showed that the U.S. housing market continued its decline — residential builders cut back at an annual rate of 15.7 percent in the second quarter.
In a separate report reflecting the state of the economy, the Labor Department said that the number of people filing claims for job loss benefits dropped by 10,000 last week, the third straight week the number has fallen after it reached a six-year high in July. Still, the number of job loss claims remained high at 425,000 — the number at this time last year was 332,000.