Washington, DC, Sept. 26--Healthy consumer spending nudged U.S. economic growth ahead at a slightly faster second-quarter pace than previously thought, the Commerce Department said on Friday, setting the stage for a second-half surge in growth.
Gross domestic product, or GDP, grew at a revised 3.3 percent annual rate in the three months from April to June, up from a 3.1 percent rate reported a month ago that Wall Street economists had expected to be unchanged. The second-quarter expansion was more than double the 1.4 percent rates posted in each of the two preceding quarters and was the strongest since a 4 percent rate of advance in the third quarter last year.
Many forecasters anticipate GDP growth is set to accelerate to rates of 4 percent or higher in the third and fourth quarters, supported by a buoyant housing market and by lean inventories that imply businesses have more incentive to make new investments. Unusually robust defense spending--up 45.8 percent in the second quarter for the strongest quarterly growth since 1951 in the Korean War era--added impetus to growth in the spring and may last for some time as U.S. involvement in Iraq and elsewhere continues.
Consumer spending increased at a 3.8 percent annual rate in the second quarter, nearly double the first quarter's 2 percent--a significant pickup since spending by consumers on goods and services fuels two-thirds of national economic activity. Nonresidential investment, generally taken as a measure of businesses' willingness to expand, grew at a 7.3 percent pace in the second quarter, not quite as strong as the 8 percent increase estimated a month ago but a major improvement from the first quarter when investment shrank at a 4.4 percent rate.
