The economy in the U.S. grew more than projected in the second quarter, showing it is overcoming the cuts in government spending and higher taxes.
Gross domestic product, the value of all goods and services produced, rose at a 1.7 percent annualized rate after a 1.1 percent gain the prior quarter that was smaller than previously estimated, Commerce Department figures showed today in Washington. Other reports showed hiring and manufacturing accelerated this month.
The GDP figures showed companies invested in new equipment and construction projects, and a pickup in orders for durable goods indicates the gains will be sustained into the second half of the year. The effects of government budget cuts will probably wane, while job gains and rising home and stock prices are shoring up consumer sentiment, making it more likely households will regain momentum after spending cooled last quarter.
“The worst of the fiscal drag is now behind us,” said Maury Harris, the New York-based chief economist for UBS Securities LLC and the best GDP forecaster over the past two years, according to data compiled by Bloomberg. “Business confidence is recovering and capital expenditures are recovering.” Harris projected growth will accelerate to about 3 percent in the last six months of 2013.
Federal Reserve policy makers said today at the conclusion of their two-day meeting that “economic growth will pick up from its recent pace and the unemployment rate will gradually decline.” The Federal Open Market Committee also said it will maintain its $85 billion in monthly bond purchases aimed at stoking the expansion and boosting employment.