Shobhana Chandra Washington
GAINS in consumer spending and business investment helped the US economy rebound faster than forecast in the second quarter following a slump in the prior three months that was smaller than previously estimated.
Gross domestic product rose at a 4 percent annualised rate after shrinking 2.1 percent from January to March, Commerce Department figures showed yesterday. The first-quarter reading was revised up from a previously reported 2.9 percent drop.
A poll of 80 economists had called for a 3 percent advance.
Consumer spending, which accounts for almost 70 percent of the economy, rose 2.5 percent, reflecting the biggest gain in purchases of durable goods in almost five years.
Purchases of durable goods, including vehicles, furniture and appliances, jumped at a 14 percent annualised rate, the most since the third quarter of 2009, when the recovery began.
Manufacturers such as Whirlpool forecast sales will keep improving in the second half of this year as increasing employment lifts consumer confidence and spending. The pick-up in growth, as the expansion enters its sixth year, is among reasons Federal Reserve policymakers continue to pare monthly asset purchases while keeping interest rates low.
“The economy is poised for much faster growth,” Joe LaVorgna, the chief US economist at Deutsche Bank Securities in New York, said before the release of the report. “The job market has gotten progressively better and that sets us up for better growth. Consumption should fare better.
“As confidence in the economic outlook improves, corporate investment will grow.” – Bloomberg