WASHINGTON – Gains in consumer spending and business investment helped the U.S. economy rebound more than forecast in the second quarter following a slump in the prior three months that was smaller than previously estimated.
Gross domestic product rose at a 4 percent annualized rate after shrinking 2.1 percent from January through March, Commerce Department figures showed Wednesday in Washington. The median forecast of 80 economists surveyed by Bloomberg called for a 3 percent advance. Consumer spending, the biggest part of the economy, rose 2.5 percent, reflecting the biggest gain in purchases of durable goods such as autos in almost five years.
Manufacturers such as Whirlpool Corp. project sales will keep improving in the second half of 2014 as increasing employment lifts consumer confidence and spending. The pickup in growth, as the expansion enters its sixth year, is among reasons Federal Reserve officials meeting on Wednesday may continue to pare monthly asset purchases while keeping interest rates low.
“The economy is poised for much faster growth,” Joe LaVorgna, chief U.S. economist at Deutsche Bank Securities Inc. in New York, said before the report. “The job market has gotten progressively better and that sets us up for better growth. Consumption should fare better. As confidence in the economic outlook improves, corporate investment will grow.”
Companies added 218,000 workers to payrolls in July, exceeding the average for the year and showing improving demand is bolstering the job market, a private report showed Wednesday. The gain this month followed a 281,000 increase in June that was the strongest since November 2012, according to data from the ADP Research Institute in Roseland, N.J.
Stock-index futures rose after the GDP report, adding to earlier gains. The contract on the Standard & Poor’s 500 Index maturing in September climbed 0.4 percent to 1,971.7 at 8:36 a.m. in New York.