31 Jul 2014
The US economy grew at an annual rate of 4 per cent in the second quarter, according to an initial Government estimate on Wednesday.
The figure marks a turnaround after gross domestic product registered its first decline in three years in the previous quarter.
The rebound in the April-June period reflected gains in consumer spending and business inventory. Consumer spending rose 2.5 per cent, spurred by purchases of durable goods after growing just 1.2 per cent in the previous quarter, the Bureau of Economic Analysis said.
The boost in second quarter GDP outpaced economists’ expectations. A survey of economists by Bloomberg news agency had predicted 3 per cent growth in the period.
Updated data showed first quarter growth fell a revised 2.1 per cent, less than the 2.9 per cent drop the Bureau of Economic Analysis reported last month.
The steep first quarter decline was attributed to an extremely hard winter that kept consumer spending down along with declines in private inventory investment and state and local Government spending.
The International Monetary Fund (IMF) last week lowered its 2014 growth forecast for the US economy, pointing to the extremely weak first quarter.
GDP would increase by a “disappointing” 1.7 per cent over the year, the Washington-headquartered IMF said in a report.
Meanwhile, the Federal Reserve said it would cut its monthly purchases of government-linked bonds to $25 billion, down from the $35 billion level set at the central bank’s last meeting in June.
The latest cut continues a policy launched in January of regularly trimming the stimulus programme. Until then, the Fed had been buying $85 billion of bonds every month.
The Fed left its benchmark interest rate unchanged at the unprecedented, near-zero level in place since December 2008.
The GDP figures released on Wednesday are an initial estimate based on incomplete data and the Government is due to release more complete figures next month. - thehindubusinessline.com