Gross domestic product, the sum of all goods and services produced, rose 2.9%, up from the 2.5% gain reported in July, the Commerce Department said today in Washington. The expansion in the first quarter was 5.6%.
The figures suggest the economy will keep expanding even as higher gasoline prices and a slump in the housing market chip away at consumer confidence. Salaries and wages were almost $100 billion greater than initially reported, the government said.
While growth is slowing, the economy is generating balanced income growth, said Bruce Kasman, chief economist at JPMorgan Securities Inc. in New York. We can get through this without too much pain.
The report also showed that inflation wasnt as high as Julys preliminary report indicated. Prices paid by consumers excluding food and energy, a measure favored by Federal Reserve policy makers, rose at a 2.8% annual rate, compared with the 2.9% previously reported.
Treasury notes were little changed after the report, as was the dollar. The Standard & Poors 500 Index rose 1 point, or 0.1 percent.
It gives people a sense there is some stability in this economy, said John Silvia, chief economist at Wachovia Corp. in Charlotte, North Carolina.Economists estimated the economy grew at a 3% annual rate last quarter, according to the median of 72 forecasts in a Bloomberg News survey. Estimates ranged from 2.5% to 3.3%.Home construction fell at an annual rate of 9.8% last quarter, the biggest drop since 1995, compared with the 6.3% drop originally reported and a 0.3% decline the first three months of the year. Consumer spending, which accounts for more than two-thirds of the economy, expanded at a 2.6% annual pace, compared with the 2.5% reported last month and a 4.8% gain in the first quarter.
Todays GDP estimates are the second for the quarter and will be revised again next month. Growth in the first quarter was the fastest in more than two years.Weve had an awfully good run in the economy with some pretty significant shocks, I think, and it wouldnt be surprising to see some slowing speed in the economy, General Mills Inc. Chief Executive Officer Stephen Sanger said in an interview on Aug. 23.