The U.S. economy grew at its fastest pace in 2-1/2 years in the second quarter and activity was broad-based, in a bullish signal for the remainder of the year.
The Commerce Department on Friday raised its estimate of gross domestic product (GDP) to show the economy expanded at a 4.6 percent annual rate. The best performance since the fourth quarter of 2011 reflected a faster pace of business spending and sturdier export growth than previously estimated.
The stronger growth profile provides a firmer base for the third quarter. So far, economic data such as manufacturing, trade and housing suggest that much of the second-quarter momentum spilled over into the third quarter. Growth estimates for the July-September quarter range as high as a 3.6 percent pace.
GDP was previously estimated to have advanced at a 4.2 percent rate in the second quarter. The revision was in line with Wall Street's expectations. The economy contracted at a 2.1 percent pace in the first quarter.
There were upward revisions to all categories, with the exception of consumer spending, where stronger healthcare outlays were offset by weaknesses in recreation and durable goods spending.
Growth in consumer spending, which accounts for more than two-thirds of U.S. economic activity, was unrevised at a 2.5 percent rate.
Business spending on equipment was raised to an 11.2 percent pace from a 10.7 percent rate. Businesses also invested more in nonresidential structures, such as gas drilling, as well as in research and development.
Domestic demand increased at a brisk 3.4 percent rate, instead of the previously reported 3.1 percent pace.
The fastest pace since the second quarter of 2010 suggested the economic recovery was more durable after growth slumped in the first quarter because of an unusually cold winter.
The strong pace of domestic demand growth helps to explain the robust job gains during the quarter, as well as the sharp decline in the unemployment rate.
The strong labor market performance during the quarter was also supported by a surge in gross domestic income, which measures the income side of the growth ledger.
GDI surged at a 5.2 percent rate, revised up from the previously reported 4.7 percent pace.
Businesses accumulated $84.8 billion worth of inventory in the second quarter, a bit more than the previously reported $83.9 billion. That saw restocking contributing 1.42 percentage points to GDP growth rather than 1.39 percentage points.
Still, there is little sign of an inventory overhang, a positive signal for third-quarter GDP growth.
Though trade was a drag for a second consecutive quarter, export growth was raised to an 11.1 percent pace, the fastest since the fourth quarter of 2010, from a 10.1 percent rate.
Housing market-related spending was revised up as was government spending.
Corporate profits rebounded a bit more strongly than previously reported from a decline in the first quarter that had been spurred by the expiration of a depreciation bonus.