WASHINGTON – The U.S. economy grew at a tepid 1.7 percent annual rate in the April-June quarter, suggesting growth will stay weak in the second half of the year.
Slightly stronger consumer spending and greater exports were the main reasons the Commerce Department reported Wednesday that growth was better than its initial estimate of 1.5 percent.
Still, growth has slowed from the 2 percent annual rate in the January-March quarter and the 4.1 percent rate in the fourth quarter of 2011.
Economists expect only modest improvement in the second half of the year. Most believe the economy will keep growing, but at a subpar rate of about 2 percent.
The economy was sluggish in the second quarter, and the slight upward revision ... does nothing to change that picture, said John Ryding, an economist at RDQ Economics, in a note to clients.
The report was the government’s second look at gross domestic product for the second quarter. GDP measures the country’s total output of goods and services, including purchases as varied as restaurant meals and highway and bridge construction.
A third and final estimate of second-quarter growth will be released next month.
Growth at or below 2 percent is not enough to lower the unemployment rate, which was 8.3 percent in July. Most expect the unemployment rate to stay above 8 percent for the rest of this year.
A weak economy and high unemployment could hurt President Obama’s re-election chances, analysts say.
Economist Robert Brusca said the various changes in the second estimate should be positive for growth going forward. He noted more consumer demand in the spring than previously thought, which drives 70 percent of economic growth.
And he pointed to less restocking of shelves, which suggests businesses could replenish stockpiles this quarter. Faster inventory growth increases factory production, which boosts growth.
But Paul Dales, senior U.S. economist at Capital Economics, said the small revision to growth offers little comfort.
We are already two months through the third quarter and more up-to-date figures show that the economy is still struggling.
Slow growth could prompt the Federal Reserve to take steps to boost the economy when policymakers meet Sept. 12.