The economy expanded more than previously estimated in the second quarter, reflecting gains in consumer spending and exports that are being threatened by costlier gasoline and a global slowdown.
Gross domestic product climbed at a 1.7 percent annual rate from April through June, up from an initial estimate of 1.5 percent and following a 2 percent gain in the first three months of the year, a revised Commerce Department report showed. The weakest gain in business investment in new equipment in almost three years restrained the pace of growth, which was the slowest since the third quarter.
Consumers and companies could continue to curb spending in the second half of the year as rising fuel costs, unemployment and the prospect of tax changes and government budget cuts hurt confidence.
“We are very much stuck in a slow-growth mode,” said Mark Vitner, a senior economist at Wells Fargo Securities LLC, who correctly forecast the revision. “We still don’t see the economy breaking free of this 1.5 percent to 2 percent growth rate. A 1.7 percent pace is the personification of the Fed’s frustration.”
Another report showed Americans signed more contracts to purchase previously owned homes in July, a sign housing will keep strengthening in the second half.
The index of pending home resales climbed 2.4 percent, exceeding the 1 percent gain median forecast of 39 economists surveyed by Bloomberg News. The gauge rose to 101.7, the highest since April 2010.
Second-quarter growth forecasts from 80 economists surveyed by Bloomberg ranged from 1.2 percent to 2.2 percent. The economy expanded 4.1 percent in the fourth quarter.
Economies around the world are cooling, other data showed. French industrial confidence in August held near its lowest level in two years, increasing pressure on President Francois Hollande’s government to revive growth in the face of Europe’s sovereign debt crisis.
In China, retailers from clothing stores to computer outlets are reporting weaker sales growth, undermining Premier Wen Jiabao’s goal of relying more on consumer spending for expansion as the economy slows.
U.S. consumer purchases, about 70 percent of the economy, climbed at a 1.7 percent annual rate, the weakest in a year and revised from a 1.5 percent initial estimate. The revision reflected the biggest gain in outlays on services since the fourth quarter of 2006. The largest contributor came from electricity and gas as temperatures across the country approached record highs.
Higher gasoline prices could further restrain households. The average cost of a gallon climbed to $3.80 Wednesday, up 47 cents from the year’s low on July 1, according to AAA, the nation’s largest motoring organization.