U.S. Growth Jumps To 3.4%

But economists still cautious

The U.S. economy accelerated to a 3.4% growth rate in the second quarter, the government reported July 27 but analysts said the pace may not be sustained over the rest of the year. The 3.4% rate was the strongest since the first quarter of 2006 and slightly ahead of the average Wall Street estimate of 3.2%.

The higher growth rate came from an improving global trade picture, including higher exports, while consumer spending cooled. Exports grew 6.4% while imports fell 2.6%, amid sharp declines in the U.S. dollar.

Consumer spending, which accounts for two-thirds of economic activity, remained a driver of the expansion, but was a lesser factor. Spending increased just 1.3%, the weakest since late 2005, compared to 3.7% in the first quarter.

The housing slowdown was much less of a drag on the economy in the second quarter, as real residential fixed investment fell 9.3%, not as steep as the 16.3% drop in the first quarter.

Inflation figures were mixed. The personal consumption expenditure (PCE) price index linked to GDP showed a 4.3% pace of increase. But the "core" rate of inflation, preferred by the Federal Reserve, rose 1.4% in the second quarter, down sharply from the 2.4% rise in the prior quarter and the slowest pace since the second quarter of 2003.

The estimate of GDP, or the market value of the nation's output of goods and services, was $13.756 trillion on an annualized basis.

Copyright Agence France-Presse, 2007

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