GDP Is Revised Upward

By John S. McClenahen Although questions remain about how strong recovery from the 2001 U.S. recession will continue to be -- particularly by the time 2005 rolls around -- growth in the second quarter of this year was considerably stronger than the U.S. Commerce Department first estimated. The department's Bureau of Economic Analysis now says that inflation-adjusted GDP grew at an annual rate of 3.1% between April and June, seven-tenths of a percentage point higher than the 2.4% rate it first calculated. In the first quarter of 2003, the economy grew at a sluggish 1.4% annual rate. Many economists figure GDP is growing at an annual rate of about 4% during the current quarter and project a rate in the mid- to high-3% range for the final quarter of 2003. Some, such as Maury Harris, chief U.S. economist at UBS Investment Research, New York, are even more bullish. He pegs real GDP growth at a 4.5% annual rate this quarter. "A strong start to consumption and capital goods shipments supports our case," he insists. Meanwhile, the U.S. labor market continues to show signs of improving-although initial claims for unemployment insurance edged up to 394,000 last week, some 3,000 higher than the revised number of 391,000 for the week ending Aug. 16. But when averaged over two weeks to smooth out a 2,000 to 3,000 distortion resulting from the recent power blackout in the East and Midwest, "claims still appear to be trending very slowly lower," says UBS' Harris.

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