Growth exceeds estimates as U.S. economy weathers budget cuts
JOB SEEKERS, such as those at an Aug. 22 job fair in New York, are finding that the U.S. economy continues to improve. Second-quarter GDP growth was revised upward Thursday to 2.5 percent, following recent jobless claim numbers that hover near a five-year low.
BLOOMBERG NEWS PHOTO/CRAIG WARGA
By Shobhana Chandra Bloomberg News
WASHINGTON - The U.S. economy expanded more than estimated in the second quarter, providing evidence that growth is picking up as the nation overcomes the effects of federal tax increases and budget cuts.
Gross domestic product rose at a 2.5 percent annualized rate, up from an initial estimate of 1.7 percent, Commerce Department figures showed Thursday in Washington, D.C. The median forecast of 79 economists surveyed by Bloomberg projected a 2.2 percent gain. Other reports today showed claims for unemployment benefits dropped and consumer confidence weakened.
The improvement in growth shows the world’s largest economy gaining momentum after a drought, Superstorm Sandy and budget battles in Washington stalled growth in the last three months of 2012. Recent data have shown the labor market is gaining strength while home prices rise, bolstering household finances.
“The economy is doing fine,” said Brian Jones, a senior U.S. economist at Societe Generale in New York, who correctly projected the gain in GDP. “It is going to weather the sequestration. Growth will accelerate in the second half.”
Jobless claims in the week ended Aug. 24 declined by 6,000 to 331,000, 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. The number of applications slumped to a more than five-year low of 322,000 earlier this month, a sign that the labor market continues to make progress.
Stocks advanced after the reports, and Treasurys declined. The Standard & Poor’s 500 Index climbed 0.7 percent to 1,645.81 at 11:45 a.m. in New York. The yield on the 10-year Treasury note rose one basis point, or 0.01 percentage point, to 2.78 percent.
Elsewhere today, reports showed German unemployment unexpectedly rose in August for the first time in three months and inflation slowed in a sign Europe’s biggest economy is cooling after a second-quarter surge.
Estimates for U.S. GDP, the value of all goods and services produced, ranged from gains of 0.3 percent to 2.5 percent, based on forecasts from economists surveyed by Bloomberg.