The U.S. economy snapped back this spring from a winter down spell, growing at a robust 4 percent annual rate in the second quarter, the Commerce Department reported Wednesday.
The economy’s winter decline also was not as sharp as previously thought, falling by a revised 2.1 percent rather than the alarming 2.9 percent reported last month by the department.
Nearly every corner of the economy contributed to the comeback this spring, according to the government report. Consumers stepped up their shopping at auto dealerships and malls after going into hibernation in the winter; exports revived; businesses invested more in equipment, plants and inventories; and state and local governments come back to life with a rare spurt of spending.
Only the federal government continued to be a drag on the economy, with a deep cut of 3.7 percent in nondefense spending.
“The economy has regained much of the momentum and ground that it lost in the largely weather-related slump in the first quarter,” said Joseph Lake, analyst at the Economist Intelligence Unit. “It grew by 1.8 percent in the first half of 2014 at an annual rate, not far below the annual average of 2 percent over the past three years.”
Annual revisions from the department showed the economy grew somewhat more slowly than previously thought in 2011 and 2012, while growing somewhat faster than previously estimated last year. The average rate of growth since the expansion started in mid-2009 remains 2.1 percent.
Mr. Lake said the increased momentum seen this spring will continue through the end of the year, with growth averaging close to 3 percent.
Contributing to the stronger outlook is the brighter outlook for jobs and income, after the economy posted the best six months for job growth since 1999 in the first half of the year, he said.
“The U.S. economy rebounded strongly in the second quarter, and further impressive growth is likely for the third quarter,” said Chris Williamson, chief economist at Markit.
“Households are set to help boost the economy in the third quarter. July survey data showed consumer confidence running at its highest since 2007, with optimism fueled by greater job security and rising employment,” he said.
Consumers are more upbeat than at any time since the Great Recession in part because the unemployment rate has dropped to 6.1 percent, its lowest since September 2008, with job growth averaging 231,000 jobs a month so far this year, he said. The Labor Department will provide its latest estimates on job growth in July on Friday.
The Federal Reserve noted the improving outlook at Wednesday’s conclusion of a two-day meeting of its rate-setting committee, at which it decided to continue winding down its extraordinary easing program of bond purchases. The Fed is on course to end its monthly purchases of Treasury and U.S. mortgage bonds by fall.
The Fed board “expects that, with appropriate policy accommodation, economic activity will expand at a moderate pace, with labor market indicators and inflation moving toward levels the committee judges consistent with its dual mandate” to increase employment and keep inflation in check, the central bank said in a statement Wednesday.
The strong snap-back from the depressed winter convinced many economists that the U.S. economy has turned a corner after five years of steady but sluggish growth and now should be able to keep growing on its own without further support from the Federal Reserve.
“An inflection point in the economy may have been reached,” said Sung Won Sohn, economics professor at California State University at Channel Islands. “Finally, it looks like the economy is on a sustained growth path.”
The strong growth report spurred gains in the U.S. stock market Wednesday morning, but the celebrating was dampened later in the day after the Fed made clear that it will be less accommodative in the future. Bond yields rose, while the Dow Jones industrial average slipped 31.75 points to close at 16,880.36.