Growth rate of world's largest economy much stronger than Wall Street expectations.
July 31, 2003: 8:53 AM EDT
NEW YORK (CNN/Money) - The pace of U.S. economic growth improved in the second quarter of 2003, the government said Thursday, coming in much stronger than economists expected.
Gross domestic product (GDP), the broadest measure of economic activity, grew at a 2.4 percent annual rate in the quarter after growing at a sluggish 1.4 percent rate in the first quarter, the Commerce Department reported. Economists, on average, expected GDP growth of 1.5 percent, according to a Reuters poll.
It was the strongest showing for GDP since a 4 percent growth rate in the third quarter of 2002.
The news, together with a Labor Department report showing another week of falling claims for unemployment benefits, helped lift U.S. stock market futures. Treasury bond prices reversed earlier gains.
Most of the second-quarter increase in GDP was due to a 3.3 percent pace in the growth of consumer spending, which makes up more than two-thirds of the total economy.
Also supporting GDP growth was a 25.1 percent gain in the pace of federal government spending, the biggest gain since 30.3 percent in the first quarter of 1967. That spending growth was mostly due to a 44.1 percent jump in defense spending, the biggest gain since a 110 percent gain in the third quarter of 1951.
The defense spending was concentrated on prosecuting the U.S.-led war with Iraq. According to most economists, the build-up to that war sank consumer confidence and spending and caused businesses to delay plans for investment and hiring.
Most economists thought the effects of the war, along with an expanding trade gap, would sink the GDP growth rate well below 2 percent in the quarter, but stronger consumer and business spending helped .
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