The U.S. economy rebounded in the second quarter, bouncing back after labor disputes at West Coast shipping ports led to lackluster growth in the first three months of the year. U.S. gross domestic product, the broadest measure of goods and services produced across the economy, grew at a seasonally adjusted annual rate of 2.3 percent in the April-June quarter, the Commerce Department said in its preliminary estimate Thursday.
Economists had forecast the U.S. economy grew at a seasonally adjusted annual rate of 2.6 percent in the second quarter, according to analysts polled by Thomson Reuters.
The Commerce Department said first quarter GDP was revised upward to growth rate of 0.6 percent, reversing previous estimates that showed the economy shrinking in the Jan.-March period.
Economists expect the economy will continue to accelerate in the second half of the year, driven by consumer spending and business investment, said Luke Tilley, chief economist at Wilmington Trust. Tilley forecasts the U.S. economy will grow at an annual rate of 3.5 percent in the third and fourth quarters.
The Commerce Department’s most recent report on U.S. consumer spending, which accounts for nearly two-thirds of U.S. economic activity, revealed Americans boosted their spending in May at the fastest rate in nearly six years. Consumer spending rose 0.9 percent in May from a month earlier, the biggest jump since August 2009. This comes after harsh winter weather weighed on some parts of the Northeast, which negatively affected retail businesses.
The first-quarter number was distorted by the unwinding of a backlog of exports and imports at West Coast ports. The cold winter also played a role in the slowdown, economists say. The West Coast port slowdown had a dramatic impact on shipping because as dockworkers and their employers negotiated a new contract, the disruptions prevented manufacturers from receiving inventories on time, slowing production.
The central bank left interest rates unchanged Wednesday. However, a notable omission from the statement was any reference to Greece’s debt crisis, or to slower growth and the recent big stock market declines in China, indicating the central bank does not view either as major threats to the U.S. economy.
“The lack of mention of China or Greece in the statement is expected because those are expected to be transitory issues,” Tilley said. “The Fed is going to be making policy based on how the U.S. economy is performing.”
The Federal Reserve released its forecasts for the U.S. economy over the next three years last month. Fed officials did revise down their projections for gross domestic product growth this year to between 1.8 percent and 2 percent, from 2.3 percent to 2.7 percent.
Most economists say this likely signals the Fed is on course to raise rates as soon as the central bank’s next meeting on Sept. 16-17 meeting, assuming the labor market continues to improve and inflation continues to move higher.