- The Washington Times - Wednesday, August 31, 2005

ASSOCIATED PRESS

The economy grew at a 3.3 percent annual rate in the second quarter, slightly less than initially estimated but still a solid performance, especially given galloping energy prices.

The new reading for the gross domestic product (GDP) for the April-to-June, quarter released by the Commerce Department yesterday, showed a tad less-robust growth than the 3.4 percent pace first estimated for the quarter by the government a month ago.

The slightly lower GDP figure reflected the fact that consumers and businesses spent less briskly than first thought. An improved trade situation also didn’t add as much to economic growth during the quarter as previously estimated.

GDP measures the value of all goods and services produced within the United States and is considered the broadest measure of the country’s economic standing. In the second quarter, GDP climbed to $11.1 trillion on an annualized basis, adjusted for inflation.

Before the release of yesterday’s report, analysts were predicting that the GDP in the second quarter would be unchanged at the 3.4 percent pace.

In the opening quarter of this year, the economy clocked in at a 3.8 percent growth rate. The main reason why growth slowed in the second quarter compared with the first was that businesses were working off excess supplies of goods. That actually subtracted nearly two percentage points from the overall GDP in the second quarter.

That paring of inventories, though, sets the stage for replenishing them in the July-to-September quarter, which should help boost economic growth, analysts say.

President Bush wants to see the economy on solid footing, especially as he tries to sell the public on his overhaul of Social Security. But his job-approval ratings have been sinking in recent polls.

High energy prices remain a wild card for the economy.

Analysts are still predicting that economic growth in the current July-to-September quarter will easily exceed a 4 percent growth rate — even with the sting of high energy costs. But growth is expected to slow in the final quarter of this year to about a 3 percent pace or less as the toll of elevated energy prices is more fully felt, analysts say.

Another possible problem for the overall economic outlook is the impact of Hurricane Katrina, which has devastated much of the Gulf Coast area.

Rebuilding efforts will add to economic growth, but analysts have different views on the extent to which that will offset any further run-up in energy prices caused by supply disruptions from the hurricane.

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