Paul Davidson, USA TODAY
The U.S. economy posted better-than-expected growth in the second quarter, bouncing back from its worst performance in five years.
The nation's gross domestic product expanded at a seasonally adjusted annual rate of 4% in the three months ended June 30, the Commerce Department said Wednesday, as consumer spending, and business investment and inventory stockpiling all rebounded strongly. Economists surveyed by Action Economics expected 3% growth.
In the first quarter, the economy shrank 2.1% -- which the government revised Wednesday from a previously reported 2.9% contraction -- as extreme winter weather dampened consumer and business spending. Although catch-up effects were expected, economists in recent weeks lowered their growth estimates in part because consumer spending rose only moderately the past few months.
The government said Wednesday that consumer spending, which makes up more than two-thirds of the economy, increased 2.5% in the second quarter, more than double the 1.2% rise in first-quarter.
And a faster pace of inventory stockpiling by businesses contributed 1.66 percentage points to the second quarter increase after subtracting 1.16 percentage points from the first quarter change.
Meanwhile, business investment in equipment surged 7%, vs. 1% drop in the first quarter.
Exports jumped 9.5% after falling 9.2% in the previous quarter.
Housing construction rose 7.5% after declining 5.3% in the earlier quarter.
Before the weak first quarter, many analysts expected households' rising wealth and falling debt, along with increased bank lending, to push economic growth well above the five-year-old recovery's roughly 2% annual pace. Recently, many forecasts of growth in 2014 were lowered to 1.5% to 2%.
Bad weather has not been the only culprit. Wage gains have barely kept pace with inflation, holding back consumer spending. And the pace of housing's recovery has fallen behind last year instead of accelerating as forecast.
Many economists expect both wage increases and the housing market to pick up in the second half of the year.
Job growth, meanwhile, has strengthened substantially this year despite the first-quarter contraction in the economy.