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Economic 2Q growth at 3.3%

Economic 2Q growth at 3.3%
GDP report revises consumer spending up; data does not include impact of hurricanes.
September 29, 2005: 9:35 AM EDT

WASHINGTON (Reuters) - The U.S. economy expanded at a steady 3.3 percent rate in the second quarter, the same as previously estimated despite slightly stronger consumer spending and business investment than previously thought, the Commerce Department said on Thursday.

In its second revision of gross domestic product (GDP), the broadest measure of national economic performance, the department noted that the upward revisions to spending were offset by somewhat weaker exports of services and inventory-building than it previously thought, leaving GDP unchanged from its estimate a month ago as Wall Street economists had forecast.

That was down from a 3.8 percent rate of growth in the first quarter but still represented a solid performance. The economy grew at annual rates exceeding three percent for nine straight quarters through the second quarter.

First estimates of third-quarter growth, when the impact of devastating hurricanes Katrina and Rita are expected to show up, will not be available for another month. On Wednesday, White House economic adviser Ben Bernanke said the storms may shave up to one percentage point of growth off third-quarter GDP but it would bounce back when rebuilding begins and would not be a lasting economic blow.

"I don't see any significant risk of a recession," Bernanke said, adding that strong consumer spending, growing incomes and the stimulus from rebuilding in the Gulf Coast would contribute to economic momentum.

Price gauges in the second-quarter GDP report ticked up slightly but still implied muted inflation. The personal consumption expenditures index was revised up to a 3.3 percent seasonally adjusted annual rate from 3.2 percent a month ago while the core index, stripping out volatile food and energy costs, gained at a 1.7 percent rate instead of 1.6 percent.

Consumer spending, which accounts for about two-thirds of national economic activity, increased at a revised 3.4 percent rate in the second quarter, up from last month's estimate of 3 percent and almost matching the first quarter's 3.5 percent. Business investment grew at a robust 8.8 percent rather than 8.4 percent, well ahead of the first quarter's 5.7 percent pace.

Inventories remained lean, leaving room for factories to boost production.

Companies reduced their inventories in the second quarter at a $1.7 billion rate, a change from last month's estimate that they had increased their stocks of unsold goods at a $2.6 billion rate, the GDP report showed.


LINK: http://money.cnn.com/2005/09/29/news/economy/gdp.reut/