The economy grew much more quickly last quarter than initially thought as businesses and consumers increased spending, the government said Thursday.þþAt 3.7 percent, the revised estimate for the annualized rate of economic expansion in the spring is more than a full percentage point higher than the initial reading reported by the Commerce Department in late July.þþIt provides further assurance that the American economy remains on an even keel, despite questions about whether the United States can skirt mounting economic turmoil in China and other emerging markets as well as a volatile stock market at home.þþThe upward adjustment was better than expected by economists on Wall Street, who predicted the revised growth rate would come in at 3.2 percent. This is the second estimate of economic growth for the second quarter; the third and final estimate will be released in late September.þþAlthough the revision was certainly good news, investors are more focused on fresher data to determine the economy’s course and whether the Federal Reserve will make its long-awaited move to raise interest rates in September or wait, in part because markets remain on edge.þþMuch of the revision Thursday was powered by increased corporate investment and additions to inventory in the spring, a sharp contrast to the fear coursing through Wall Street and bourses overseas this month.þþHowever, the impact of the recent plunge in stock prices on the broader economy will not be known for some time. Growth data for the current quarter will be released in late October. And the statistics for the Labor Department’s report on hiring and unemployment in August, due next week, were collected earlier this month, before the stock market correction took hold.þþStill, most economists suggest that whatever quarter-to-quarter zigzags there are in the numbers, the American economy continues to rumble along at a steady, if unspectacular pace.þþOfficially, the data paints a picture of a sharp slowdown in the beginning of 2015 and a pickup in the spring, with a slight deceleration likely this quarter. But the true underlying growth rate all along has been in the neighborhood of 2.5 to 3 percent annually, said Nariman Behravesh, chief economist at IHS, a private research and forecasting firm in Lexington, Mass.þþ“Would we like to see faster growth?” asked Mr. Behravesh, in an interview before the release of the data on Thursday. “Of course. But it has been enough to bring down the high level of unemployment.”þþHistorically, he said, the growth rate is modest, adding that the American economy faces what he termed “speed limits,” including the retirement of the baby boomers, slower population growth and weak productivity gains recently.þþAlthough inventory increases helped lift the growth rate for the second quarter, the downside of all those newly restocked shelves and warehouses is that they tend to pull growth forward, lowering the likely rate of expansion in the second half of 2015.þþMr. Behravesh said he expected the growth rate to sink to 1.5 to 2 percent in the current quarter, and rebound to near 3 percent during October, November and December.þþ“There was a bigger accumulation in inventories than previously estimated, which is fine for this quarter, but there’s likely to be payback as those inventories run down in the third quarter,” Mr. Behravesh said.þ
Source: NY Times
