U.S. economy in Q2 growth, rebounds at 4.2 GDP rate – Report

The U.S. economy rebounded more strongly than initially thought in the second quarter with more of the growth being driven by domestic demand and less by restocking by businesses.
Gross domestic product expanded at a 4.2 percent annual rate instead of the previously reported 4.0 percent pace, the Commerce Department said yesterday, reflecting upward revisions to business spending and exports.
It combined with separate reports showing a second consecutive week of declines in the number of Americans filing new claims for unemployment benefits and a jump in home purchase contracts to give the economy a healthy glow.
“We expect growth during the latter half of the year to continue running at an above three percent pace, underscoring the rebound in growth momentum as economic slack continues to decline,” said Gennadiy Goldberg, an economist at TD Securities in New York. The dollar firmed against a basket of currencies on the data. U.S. stocks were down as traders kept a wary eye on Ukraine, which accused Russia of entering the country. Prices for U.S. Treasury debt rose as the troubles in Ukraine triggered flight-to-safety bids.
Separately, the Labor Department said the number of Americans filing new applications for jobless benefits slipped 1,000 to a seasonally adjusted 298,000 last week, underscoring the strengthening labor market fundamentals.
In a third report, the National Association of Realtors said its Pending Home Sales Index, which leads home resales by a month or two, increased 3.3 percent in July to its highest level in 11 months.
That was the latest indication that the housing market recovery was back on track after faltering in the second half of 2013 in the wake of a run-up in mortgage rates.
The composition of growth in the second quarter was even more encouraging, with the sources of growth broad-based.
Domestic demand increased at a brisk 3.1 percent rate, instead of the previously reported 2.8 percent pace. It was the fastest pace since the second quarter of 2010 and suggested the recovery was becoming more durable after output slumped in the first quarter because of an unusually cold winter.
The broad-based growth, however, will not be enough to spur the Federal Reserve to start raising interest rates as slack still exists in the labor market and inflation will probably continue to run below the U.S. central bank’s 2 percent target.