GDP Grows 5.3 Percent
W A S H I N G T O N, Aug. 25 -- The U.S. economy grew at a robust annual rateof 5.3 percent in the second quarter with strong investment by Americanbusinesses offsetting less brisk spending by consumers.
The Commerce Department reported today that the increase in thegross domestic product — the nation’s total output of goods andservices and the broadest measure of economic health — in theApril-June quarter surpassed growth in the first quarter when theeconomy grew at a 4.8 percent annual rate.
The government’s revised reading on GDP — based on more datathan its initial calculation — showed the economy growing slightlyfaster than the 5.2 percent rate it estimated one month ago. Therevised figure was in line with many analysts’ predictions of a 5.4percent growth rate.
In the current quarter, many analysts believe the economy hasslowed to a growth rate of around 3.5 percent to 4 percent.
Housing Starts Figure DeclinesIn a second report, the National Association of Realtorsreported that existing-home sales plunged 9.8 percent in July to aseasonally adjusted annual rate of 4.79 million units as highermortgage rates cut into demand.
The trade group says the Federal Reserve’s rate boosts tend totake a while to curb buying and that effect is now being seen. Itsays the recent decline in mortgage interest rates may give homesales a boost in the coming months.
The average 30-year, fixed interest rate in May was the highestseen since February 1995.
Inflation EasesEven with the robust growth in the second quarter, inflationpressures actually moderated. An inflation gauge tied to the GDP,and closely watched by Federal Reserve Chairman Alan Greenspan,rose at an unrevised annual rate of 2.3 percent in the secondquarter, down from a 3.5 percent rate in the first quarter.
The Federal Reserve has raised interest rates six times over thelast 14 months to slow the economy and keep inflation undercontrol. On Tuesday, the Fed decided to leave interest ratesunchanged, but left the door open to further rate increases shouldtight labor markets spark wage and price pressures down the road.
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