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Government spending shrank an annual rate of 0.9 percent in the second quarter, much worse than the 0.4 percent drop initially estimated. Spending by the federal government shrank at a 1.6 percent annual rate. State and local governments cut at a 0.5 percent rate. Two key areas of the economy -- housing and business investment -- remained strong in the revision to second-quarter growth. Housing construction grew at an annual rate of 12.9 percent, the fourth consecutive quarter of double-digit growth. Business investment on structures was revised up to at 16.1 percent rate, although spending on equipment was revised a bit lower. Consumer spending, which accounts for 70 percent of economic activity, grew by a 1.8 percent rate in the second quarter. That's unchanged from the initial estimate but down from a 2.3 percent growth rate in the first quarter. Many economists said a key signal of the economy's health in the second half of 2013 will come from Friday's report on consumer spending in July. Consumer spending held up in June. But rising interest rates might have caused it to slow in July. Long-term rates have risen since Chairman Ben Bernanke said in June that the Federal Reserve could begin trimming its bond purchases later this year if the overall economy and the job market kept improving. Many economists think the Fed will begin slowing its monthly bond purchases to $70 billion or $75 billion. Others think it will delay any pullback in bond buying to await more data on how the economy is faring in the second half of the year.
[Associated
Press;
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