MercoPress. South Atlantic News Agency

US economy surprise: 3.3% expansion in second quarter

The US economy grew at a revised 3.3% annually in the second quarter of 2008, said on Thursday the Commerce Department, much higher than the original estimate of 1.9%.

The rebound was linked to strong US exports, helped by the weak dollar, while government tax rebates also boosted consumer spending. GDP grew at a rate of 0.9% in the first quarter, after a 0.2% contraction in the last three months of 2007. The Federal Reserve has warned the economy will remain weak this year. The data showed that exports grew at an annualized rate of 13.2%, higher than the government's initial estimate of 9.2%. Imports fell at a rate of 7.6% as the US economic slowdown reduced demands for goods made overseas. The improved trade balance added 3.1 percentage points to second-quarter GDP, the biggest since 1980. The slowdown in the housing market was evident, as builders cut back and businesses reduced their spending. Consumer spending, boosted by the government's 600 US dollars tax rebate payments, rose by 1.7% slightly higher than the previous quarter's 1.5%. This has led some analysts to say that the latest figures lent support to the argument that the US was not heading for a recession. However recent data on the US housing market suggests a grim outlook for the sector. US house prices were down a record 15.4% in the April to June quarter compared with a year ago, according to a closely-watched report released earlier this week. The decline was recorded by the latest S&P/Case-Shiller survey of US national home prices. The report said the fact that the falls were nationwide was the latest sign the US housing downturn is continuing. Separate government data said sales of new homes were at an annual rate of 515,000 units in July, up slightly from June, but still near a 16-year low, and half the rate of new home sales one year ago. However earlier in the week new durable goods demand rose by a surprise 1.4% in July, led by a big increase in civilian aircraft sales, according to a release from the Commerce Department. The revised June figure was also up to 1.3% from 0.8%. Even when July's 3.1% rise in transportation orders is pulled out, demand for other durables rose 0.7%. The data shows that some industries are proving resilient to economic slowdown. Analysts had been expecting a 0.5% drop in durables orders in July excluding transportation. July's 3.1% rise in transportation durable goods orders were fuelled by a 28% rise in commercial aircraft sales. However, such aircraft orders are very volatile, and July's 28% rise came after a 21.3% fall in June. The figures also come despite a collapse in car sales, normally the biggest component in consumer-led durable goods.