US growth up modestly in Q2, aided by stimulus

Expansion accelerated modestly in the second quarter as government stimulus payments helped consumers add more buying punch to the economy, a Commerce Department report on Thursday showed.
Gross Domestic Product or GDP grew at a 1.9 percent annual rate, up from a revised 0.9 percent rate in the first quarter that previously was reported as 1 percent.
Economists surveyed by Reuters had expected a 2.0 percent rise in GDP in the second quarter.
That followed a 0.2 percent contraction in GDP during the final quarter of 2007 and avoided pushing the economy into back-to-back declines that would have met a popular definition of recession. Businesses reduced inventories at the sharpest rate since the end of 2001 in a sign they anticipate restrained growth ahead.
Consumer spending that fuels two-thirds of U.S. economic activity grew at a 1.5 percent annual rate in the second quarter, up from 0.9 percent in the first quarter and 1 percent in the fourth quarter last year. The department noted that personal incomes had risen more sharply in the second quarter and attributed it primarily to the stimulus payments that the government was issuing to qualifying consumers.
The economy continues to be hobbled by a severe downturn in the housing sector but the drag from it was less severe in the second quarter. Spending on homebuilding contracted at a 15.6 percent annual rate in the second quarter, down from rates of. 25.1 percent in the first quarter and 27 percent in last year's fourth quarter.
The department also issued benchmark revisions for the three-year period 2005-2007, which showed growth was weaker in each year than previously thought. GDP grew 2 percent in 2007 instead of 2.2 percent, 2.8 percent instead of 2.9 percent in 2006 and 2.9 percent rather than 3.1 percent in 2005.
The fourth quarter of 2007 was the weakest three months since the third quarter of 2001 amid the last official recession when it shrank at a 1.4 percent rate.
Businesses kept reducing inventories in the second quarter, possibly a sign that they are bracing for a prolonged period of lackluster growth. Stocks of unsold goods declined at a $62.2 billion rate — the sharpest since an $86.7-billion rate in the fourth quarter of 2001 — after decreases of $10.2 billion in the first quarter and $8.1 billion in the fourth quarter. (Reuters)