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Economy in U.S. Grew More Than Forecast in Second Quarter

August 29, 2013

(Updates with economist comment in fourth paragraph.)

 

Aug. 29 (Bloomberg) -- The U.S. economy expanded at a faster pace in the second quarter as a smaller trade deficit and gains in inventories overshadowed the effects of federal budget cutbacks.

Gross domestic product rose at a 2.5 percent annualized rate, up from an initial estimate of 1.7 percent, Commerce Department figures showed today in Washington. The median forecast of 79 economists surveyed by Bloomberg projected a 2.2 percent gain.

The improvement is consistent with projections that the U.S. has been able to weather the fallout of government budget cuts and higher taxes and is poised to pick up once those restraints fade. Gains in employment and home prices that are shoring up confidence signal households will sustain spending, the biggest part of the economy.

"The economy is doing fine," said Brian Jones, a senior U.S. economist at Societe Generale in New York, who projected a 2.5 percent gain in GDP. "It is going to weather the sequestration. Growth will accelerate in the second half."

The number of Americans filing applications for unemployment benefits dropped last week, a sign that the labor market continues to make progress, another report today showed. Jobless claims in the week ended Aug. 24 declined 6,000 to 331,000 from 337,000 the week before, according to figures from the Labor Department. The decrease was in line with the median forecast of 50 economists surveyed by Bloomberg that called for a drop to 332,000.

 

Shares Rise

 

Stock-index futures held earlier gains after the reports. The contract on the Standard & Poor’s 500 Index maturing in September climbed 0.1 percent to 1,634.4 at 8:56 a.m. in New York.

Estimates for GDP, the value of all goods and services produced, ranged from gains of 0.3 percent to a 2.5 percent, based on forecasts from economists surveyed by Bloomberg.

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