The U.S. economy expanded in the second quarter at the fastest rate since the last three months of 2011 as companies stepped up investment and households boosted spending.
Gross domestic product grew at a revised 4.6 percent annualized rate, up from a previous estimate of 4.2 percent, Commerce Department data showed today in Washington. The increase matched the median forecast of 81 economists surveyed by Bloomberg and followed a 2.1 percent decline in the first three months of the year.
Busier assembly lines at the nation’s factories and job growth that’s kept Americans spending indicate companies are a bit more upbeat about the prospects for demand. As the world’s largest economy and labor market improve, Federal Reserve policy makers are debating how much longer to keep interest rates near zero.
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“After a very aberrant first quarter, growth is looking stronger for the balance of the year,” Dana Saporta, U.S. economist at Credit Suisse Group AG in New York, said before the report. While the second quarter probably overstates the underlying trend in growth, “we’re not looking for a dramatic slowdown for the rest of the year — something close to 3 percent growth for the second half looks likely.”
Forecasts for second-quarter GDP, the value of all goods and services produced in the U.S., ranged from gains of 3.4 percent to 5 percent, according to the Bloomberg survey. The estimate is the third and final for the quarter.
Stock-index futures held gains after the report, with the contract on the Standard & Poor’s 500 Index expiring in December rising 0.2 percent to 1,965.4 at 8:34 a.m. in New York.
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The revision reflected bigger gains in corporate spending on equipment and properties. Investment in nonresidential structures added 0.35 percentage point to second-quarter growth, the most since the first three months of 2012.
Business investment increased at a 9.7 percent annualized rate, up from a previously estimated 8.4 percent pace. Corporate spending on equipment was revised to an 11.2 percent rate from an earlier reading of a 10.7 percent increase, while outlays for structures climbed at a 12.6 percent pace in the second quarter.
A separate report yesterday showed demand for business equipment climbed more than forecast in August, indicating corporate investment will continue to boost economic growth. Orders for non-military capital goods excluding aircraft climbed 0.6 percent following a 0.2 percent decrease in July that was smaller than previously estimated, according to the Commerce Department’s report.
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Carnival Corp. (CCL:US) said it expects to spend roughly $3 billion a year through 2016 on capital expenditures, an increase from the Miami-based company’s estimates at the end of last year. The world’s largest cruise-line operator reported third-quarter profit that beat analysts’ estimates this week as passengers took more trips.
“We’re not afraid to invest if we see a line of sight return from that investment,” Chief Executive Officer Arnold Donald said on a Sept. 23 conference call. “We aren’t afraid to reinvest in the business to drive yields and to drive revenues.”
Today’s report showed consumer purchases, which account for almost 70 percent of the economy, increased an unrevised 2.5 percent at an annual rate.
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Spending on services was also little changed from the previous estimate, contributing 0.42 percentage point to second-quarter GDP. A report earlier this month from the Census Bureau showed revenue at health-care providers climbed following a drop in the first quarter, as households boosted outlays on such services in the wake of President Barack Obama’s Affordable Care Act.
While health care expenditures climbed, Americans spent less recreational and other services, today’s report showed.
Inventories increased at an $84.8 billion annualized pace in the second quarter after a previously reported $83.9 billion annualized rate. In the first quarter they rose at a $35.2 billion pace. Stockpiles added 1.42 percentage points to GDP last quarter.
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Economists project growth will cool to a more sustainable pace after the second-quarter rebound. The median forecast of 79 economists see GDP expanding an average 3 percent in the second half of 2014.
“Even 3 percent is a fairly good result given how disappointing this recovery has been,” Saporta said. “What we need to see in order for growth to continue is strengthening household spending and also strengthening business investment.”
Final sales to domestic purchasers, which exclude inventories, increased 3.4 percent in the second quarter, the most in four years, compared with a previously reported 3.1 percent increase.