Economic growth slightly better than expected
By NELSON D. SCHWARTZ
The New York Times | August 30,2012
AP File Photo
A worker at the Ford Stamping Plant moves a stack of Lincoln MKS body sides in Chicago Heights, Ill., in this April 2012 file photo. The U.S. economy grew at a 1.7 percent annual rate in the April-June quarter.
The economy grew at a slightly faster pace in the second quarter than initially estimated, according to Commerce Department data released Wednesday, increasing at an annual rate of 1.7 percent.
The revision was driven by stronger export growth, along with fewer imports than originally estimated and a slight uptick in personal consumer spending. Inventory growth cooled, underscoring continued caution by businesses about the economic outlook.
And in another sign that the housing market has regained its footing, pending home sales in July rose to their highest level in more than two years, according to data released Wednesday by the National Association of Realtors. The Pending Home Sales Index, which reflects contracts but not closings, rose 2.4 percent from the prior month.
On Tuesday, the latest figures from the Standard & Poor’s Case–Shiller Home Price Index showed that home prices rose 1.2 percent nationally in June from the same period a year ago. Home prices remain down almost a third from their peak in 2006, but a firming housing sector is one small bright spot in an otherwise cloudy economic outlook.
Indeed, while analysts had been expecting the small upward revision for quarterly economic growth in the second quarter, up from the initial estimate of 1.5 percent, the latest figures still represent a deceleration in gross domestic product growth from the first quarter, when the economy grew at a 2 percent rate.
The anemic pace of the recovery is a critical issue in the presidential election race, and few economists expect the economy to speed up anytime soon. In fact, despite the upward revision Wednesday, many economists see the economy actually slowing in the second half of the year.
Julia Lynn Coronado, chief economist for North America at BNP Paribas, said she expected economic growth to slow to 1.3 percent in the third quarter, improving only slightly to 1.8 percent in the fourth quarter.
“It’s not disastrous, but it is one reason the Federal Reserve is on high alert,” she said, referring to widespread speculation that the U.S. central bank could soon embark on a third round of monetary easing.
Federal Reserve policymakers hold their next meeting on Sept. 12 and 13, and the continued slow growth along with persistently high unemployment — 8.3 percent in July — could prompt the Fed to act then. At the current 1.7 percent rate, the economy is growing too slowly to make a dent in the unemployment rate.
Later this week, the chairman of the Fed, Ben S. Bernanke, will speak at the central bank’s annual gathering in Jackson Hole, Wyo., and observers will be closely watching the address for any clues about the Fed’s future course. Two earlier rounds of so-called quantitative easing failed to produce a sustained increase in growth, and despite historically low interest rates, businesses remain cautious about new investment.
Rising uncertainty about the presidential election in November and fiscal policy in the United States is crimping growth, Coronado said, along with continuing fears over Europe’s debt problems and a slowdown in China’s once-booming economy. Many companies are holding off on expansion plans ahead of the planned expiration of Bush-era tax cuts in January, along with automatic budget reductions that are set to go into effect unless Congress comes up with a deal to cut the deficit.