Friday, August 31, 2007

Change of Pace: Economy Grows at Fastest Pace in a Year

WASHINGTON (AP) - The economy grew at its strongest pace in more than a year during the spring as solid improvements in international trade and business investment helped offset weakness in housing. The gross domestic product, the broadest measure of economic health, expanded at an annual rate of 4 percent in the April-June quarter, significantly higher than the 3.4 percent rate the government had initially estimated a month ago, the Commerce Department reported Thursday. The 4 percent GDP growth rate for the second quarter marked a sharp jump from the anemic 0.6 percent pace turned in during the first three months of the year. It was the fastest GDP increase since a 4.8 percent growth rate in the first three months of 2006.

Since that time, the economy had slowed sharply, reflecting a major drag from housing, which is in its worst slump in 16 years.

The revision from the initial estimate of 3.4 percent second quarter growth reflected an improving trade deficit, with stronger export sales and fewer imports.
Business investment, in the form of rebuilding of inventories, and construction of shopping centers, office buildings and other non-residential projects was also stronger than previously believed.

Consumer spending, which accounts for two-thirds of total economic activity, did show a marked slowdown in the second quarter, growing at an annual rate of 1.4 percent, less than half the first quarter increase.

Housing construction, which had been a standout performer during five boom years, suffered another drop, falling at an annual rate of 11.6 percent, the sixth straight decline in this industry.

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