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 Gross domestic product expanded at a 2.3 percent annual rate, the
Commerce Department said on Thursday. First-quarter GDP, previously
reported to have shrunk at a 0.2 percent pace, was revised up to
show it rising at a 0.6 percent rate.
The revision to first-quarter growth reflected steps taken by the
government to refine the seasonal adjustment for some components of
GDP, which economists said left residual seasonality in the data, as
well as new source data.
The Fed on Wednesday described the economy as expanding "moderately"
while upgrading its view of the labor market and saying housing had
shown "additional" improvement. The Fed's assessment left the door
open for a possible hike in interest rates in September, which would
be the first rise since 2006.
While second-quarter GDP growth was a bit below economists'
expectations for a 2.6 percent rate, the growth composition pointed
to firming fundamentals.
A measure of private domestic demand, which excludes trade,
inventories and government expenditures, increased at a 2.5 percent
rate after rising at a 2.0 percent pace at the start of the year.
Growth in the second quarter was boosted by consumer spending as
households used some of the windfall from cheaper gasoline in late
2014 and early this year to go shopping. The strengthening labor
market also encouraged consumers to loosen their purse strings.
Consumer spending, which accounts for more than two-thirds of U.S.
economic activity, grew at a 2.9 percent rate from a downwardly
revised 1.8 percent pace in the first quarter. Consumer spending was
previously reported to have increased at a 2.1 percent rate at the
start of the year.
The saving rate fell to 4.8 percent from 5.2 percent.
A firming housing market also supported the economy in the second
quarter, as did exports, and state and local government spending.
However, the energy sector continued to weigh on growth as it
struggles with the lingering effects of deep spending cuts by
oil-field companies like Schlumberger <SLB.N> and Halliburton <HAL.N>
in the aftermath of a more than 60 percent plunge in crude oil
prices last year.
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Business spending on structures fell at a 1.6 percent rate after
stumbling 7.4 percent at the start of the year. Equipment spending
fell at a 4.1 percent rate.
Spending on mining exploration, wells and shafts plunged at a 68.2
percent rate, the largest decline since the second quarter of 1986.
This category dropped at a 44.5 percent pace in the first quarter.
But there are signs that the energy spending rout might be nearing
an end. Data last Friday showed U.S. energy firms added 21 oil rigs
last week, marking the third increase over the past 33 weeks.
Schlumberger said last week it believed the North American rig count
may be bottoming and that a slow rise in both land drilling and
completion activity could occur in the second half of the year.
Exports rebounded in the second quarter, despite a strong dollar,
while imports rose moderately. That left a smaller trade deficit
that added 0.13 percentage point to GDP growth.
Inventory investment slowed after the first quarter's brisk pace.
Businesses accumulated $110.0 billion worth of merchandise, down
from $112.8 billion in the first quarter. While inventories did not
add to second-quarter GDP growth, that is good news for the
remainder of the year.
With oil prices having risen during the second quarter and consumer
spending having picked up, inflation pressures accelerated sharply.
The personal consumption expenditures price index rebounded at a 2.2
percent rate, the fastest since the first quarter of 2012, after
falling at a 1.9 percent rate at the start of the year. Excluding
food and energy, prices increased at a 1.8 percent pace.
(Reporting by Lucia Mutikani; Editing by Andrea Ricci)
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