- The Washington Times - Thursday, August 28, 2008

The U.S. economy grew much faster during the second quarter than originally reported, the Commerce Department said Thursday. Analysts, however, expect growth to falter significantly during the current quarter and turn negative before the end of the year.

Gross domestic product (GDP), adjusted for inflation, increased at an annual rate of 3.3 percent during the April-June period, much faster than the 1.9 percent rate the government reported last month. The trade sector contributed 3.1 percentage points to the 3.3 percent growth rate as exports increased at an annual rate of 13.2 percent during the second quarter. Imports declined at a 7.6 percent annual rate.

Last quarter’s relatively rapid growth rate followed a 0.2 percent decline in the fourth quarter of 2007 and a 0.9 percent growth rate during the January-March period.

Personal consumption expenditures, which account for 70 percent of GDP, grew by 1.7 percent during the second quarter. Tax rebate checks stimulated consumption somewhat last quarter.

Residential investment declined by 15.7 percent, following three quarterly declines in excess of 20 percent. Business investment increased at an annual rate of 2.2 percent, although spending on equipment and software fell by 3.2 percent.

Notwithstanding the second quarter’s upwardly revised growth rate, the U.S. economy appears to be slipping into an old-fashioned recession, said Martin Regalia, vice president for economic policy at the U.S. Chamber of Commerce. He said he wouldn’t be surprised to see negative growth during the fourth quarter of this year and the first quarter of 2009.

We expect GDP growth to slow in the third quarter to around 1.5%, but then to dip to zero or below in the fourth as the credit crunch bites harder, said Nigel Gault, the chief U.S. economist at Global Insight.

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