More vigorous economy emerging
WASHINGTON -- The U.S. economy has rebounded with vigor from a grim start to 2014 and should show renewed strength into next year.
That was the general view of analysts Wednesday after the government estimated that the economy grew at a fast 4 percent annual rate in the April-June quarter. Consumers, businesses and governments joined to fuel the second-quarter expansion. The government also said growth was more robust last year than it had previously estimated.
Whether the healthier expansion will lead the Federal Reserve to raise interest rates sooner than expected is unclear. In a statement it issued Wednesday after a policy meeting, the Fed offered no clearer hint of when it will start raising its benchmark short-term rate.
The economy sprang back to life after a dismal winter in which it shrank at a sharp 2.1 percent annual rate. The government upgraded that figure from a previous estimate of a 2.9 percent drop. But it was still the biggest contraction since early 2009 in the depths of the Great Recession.
Last quarter’s bounce-back reinforced analysts’ view that the economy’s momentum is extending into the second half of the year, when they forecast annual growth of around 3 percent.
The government also updated its estimates of growth leading into this year. They show the economy expanded in the second half of 2013 at the fastest pace in a decade and more than previously estimated. The revised data also show that the economy grew faster in 2013 than previously estimated, though more slowly in 2011 and 2012 than earlier thought.
The second quarter’s growth in the gross domestic product -- the total output of goods and services -- was the fastest since a 4.5 percent increase in July-September quarter of 2013.
At the same time, a higher trade deficit slowed growth as imports outpaced an increase in exports.
Paul Ashworth, chief U.S. economist at Capital Economics, said that given last quarter’s rebound, he’s boosting his estimate for growth this year to 2 percent, up from a previous 1.7 percent forecast. Ashworth said the economy’s growth also supported his view that the Fed will be inclined to start raising rates early next year.
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